Thailand’s TPI Polene (TPIPL): The worst isn’t over

Thailand’s TPI Polene (TPIPL): The worst isn’t over
Published: 19 September 2008

Forecast for TPIPL’s 2008 earnings was revised down to a net loss of Bt4.9bn from a net profit of Bt1.8bn as the company recorded provision expenses for the Bt6.9bn fine over stock manipulation in its 2Q08 financial statement.

On the valuation side, the negative impact of the huge fine to DCF target price is greater than expected because the company recorded the fine as a liability in its balance sheet in 2Q08 versus previous estimate of cash outflow for the fine payment in 2012 (assuming it loses its appeal to the Supreme Court).

Besides, to be more conservative, we incorporated fines from hired machinery of Bt2.2bn (assuming it loses its appeal in the Supreme Court after losing in the Central Bankruptcy Court). This amount is an off-balance sheet debt and excludes an interest charge of 7.5% p.a. New target price is Bt4.00 per share in 2009 (from Bt6.00 per share in 2008).