Thoresen Thai Agencies

Thoresen Thai Agencies Plc (TTA)

Capital increase plan cancelled as not supported by shareholders
TTA announced at its extraordinary meeting no.1/2013 on 14 December 2012
as follows.
1) 86.53% of the shareholders had approved a decrease of authorized share
capital from B783,004,413m to B708,004,413 by cutting the unsold 75
million shares.
2) Although the shareholders had already approved stock dividend and cash
dividend payment, the capital increase plan was cancelled which resulted
in no new shares to pay as dividend, so all related agendas, including the
newly issued shares allocation and the dividend payment, were finally
cancelled.

Revise up 2013’s book value to reflect capital increase plan cancellation
In our previous 2013’s forecast we had increased the number of shares and
the share capital as a result of the capital increase. However, as TTA canceled
the capital increase plan, we have to revise down our forecast to normal
again, which does not have an impact on net profit but EPS and BV.
Accordingly, EPS in 2013 is revised up from B0.12 to B0.24, while BVPS in
2013 is revised up from B19.97 to B26.70. Now TTA still needs money to
acquire second hand vessels as a preparation for a recovery of the dry bulk
business in the next 1-2 years and to have a new drilling vessel built as the
current one will be discharged in the next 2 years after having been used for
more than 30 years. However, in borrowing money from a bank there is a
condition that the company has to have its own investment of not less than
50%. Consequently, the only possible way to raise money is to ask for an
approval from shareholders for bonds issuance, which is projected to be
granted as shareholders will not have to increase their investment and it will
not have an effect on BV but might have higher funding cost than borrowing
money from a bank.

New fair value is B20. Reiterate to Hold. To gradually recover in 2H13
Fair value in 2013, based on 0.75x PBV instead of 0.8x, is B20, implying
17.6% upside. However, we reiterate our recommendation of HOLD as TTA
still has a problem about a source of capital for additional investment as a
preparation for the future business recovery. Meanwhile, in the first half of
FY2013, TTA might continue to face losses as it is a low season for the
offshore business, Mermaid Maritime but it would revert to profit again when
a high season arrives in 2H13. Moreover, Mermaid have joined with a partner
and signed a 5-year contract for an underwater exploration and maintenance
project worth of US$530m, from which Mermaid will recognize around 60-
70% income and which will start a full service since 3Q13 onward.