TPI Polene (TPIPL) announced a high 4Q09 net profit of Bt2,866mn (EPS Bt1.44), up 443% QoQ and from the previous year’s loss of -Bt92m. If excluding extra items, a gain from debt repurchase of Bt2,483mn and a forex loss of -Bt44m, TPIPL would have posted a disappointing normalised profit of just Bt344mn (EPS Bt0.17), up 10% qoq and 107% yoy. TPIPL sales were down to Bt5,200mn (-4% QoQ, -4% yoy) even though domestic cement demand was up and LDPE petrochemicals were higher this quarter. The gross margin improved to 22.3% from 21.2% in the previous quarter and 20.6% in the previous year.
Enforcement of the court ruling is currently awaiting a related development of another hearing on the payment of a fine by Stern, Stewart (Thailand), who were also ordered to pay a Bt6.9bn fine scheduled for Feb 22, 2010. This delay is viewed as another high-risk situation for TPIPL.
On the balance sheet, as of 2008, TPIPL had a total debt of Bt12,758mn from 1) liabilities under debt restructuring of Bt6,342mn, 2) liabilities under debt restructuring under consideration by the court of Bt3,807mn, 3) the accrued interest payable under the master restructuring agreement of Bt2,049mn and 4) bank overdrafts and short-term loans from financial institutions of Bt560mn. After successful debt restructuring, the total TPIPL debt is now down to Bt5,443mn (excluding provisions for the fine of Bt6,900mn) along with a gain from debt restructuring of Bt3,117mn.
As the economic recovery and the SP2 package will drive 2010 profits, the current price of Bt7.75 is trading on a 2010 PER of 8.1x and below other stocks in the cement sector. The TPIPL fair value is estimated at Bt9.5 based on a 2010 PER of 10x and below our industry rating of 12x-15x. The current price is still below the book value (excluding surplus on asset revaluation) of Bt11.86 per share. The current share is below fair value, however still with a very high risk of foreclosure to effect payment of the court fine.