ITD in steel joint venture

With a Japanese investor, it considers setting up a 50:50 joint venture, which will invest about Bt300 billion in the smelting plant in Dawei, Burma. The plant, to require 12,000 rai of land, will have the annual capacity of 10 million tonnes. It will be located in the industrial area, which is being developed by the construction company.

 Premchai Karnasuta, president of ITD, said yesterday that the company has received the letter of interest from the Japanese investor.
 ITD has been awarded the right to develop 160,000 rai in Dawei into an industrial hub.
 According to Premchai, 3,500 rai has been allocated for a power plant. Next year, ITD plans to sell about 40,000 rai, mostly to accommodate the oil/gas and petrochemical industries. PTT has shown interest to build its presence there, he said.
 Within 2015, roads, ports and power plants are scheduled for completion. Within 10 years, all infrastructure would be ready and the entire area should be occupied within 20 years. On completion, it would be home for a smelting plant, a fertiliser plant, a refinery and a petrochemical plant, among others, Premchai said.
 "We're convinced that our revenue in 2012 would grow more than 15 per cent and it should expand significantly in the subsequent years," he said.  
 

DBS Vickers Securities (Thailand) said in a research note that there has been little progress since ITD signed the agreement with the Myanmar Port Authority late last year for the development in Dawei. Apart from signing an MOU with Ratchaburi Electricity Generating Authority to develop the power plant, the project is still far from being realised. In addition, without strategic investors in the project, ITD’s balance sheet would be further stretched as it tries to accommodate a project of this scale.
 
It noted that ITD shows low earnings visibility as well as a weakening balance sheet that could affect its ability to secure new projects and financing. With losses in consecutive quarters coupled with an aggressive investment policy, the net debt-to-equity ratio from 51 per cent in 2005 to 241 per cent in the third quarter.
"It might breach the 250 per cent restriction under its Company Book covenant, and may need to raise capital in the medium term," DBS said.

In the third quarter, ITD's net losses doubled from the previous quarter, with gross margin halved to 3 per cent. At the end of the quarter, ITD possesses Bt170 billion backlog and is the lowest bidder for projects worth Bt203 billion.