Jasmine International
Play
Sell as price rebounds Although JAS had already fallen to absorb negative news, two legal issues: claiming of as much as B10bn debts by old creditors and TT&T demanding TTTBB shares back, would still depress the share price. In order to reduce risk, we
Jasmine International Plc (JAS)
- Share price falls from two negative factors
JAS share price fell 5.3% as a result of the two following reasons. 1) The
Supreme Court has withdrawn the order of the Central Bankruptcy Court to
implement the rehabilitation plan. This gave the rights for creditors of the
company to claim for debt repayment from the company. According to an
informed source, four creditors have presented themselves to demand for
debts at the total amount of B10bn (the principal plus arising interest), which
is larger than the amount of debts from all the creditors the company’s legal
advisor has estimated at not exceeding B1.3bn. 2) TT&T has filed a lawsuit
against JAS, demanding JAS to transfer shares in TTTBB (JAS indirectly
holding 99.2% stake) valued B868m, or 69.4% of TTTBB’s total paid-up
shares, to the shareholders of TT&T; TT&T claims that JAS's purchase of
TTTBB’s paid-up shares was unjust to TT&T (see page 2). TT&T is currently
filing a petition, requesting for the court's control of TTTBB's property
- During forecast review
We are reviewing earnings forecast of JAS, especially regarding JAS creditor
issue. We may have to include the debt provision in the income statement
again (we had previously included bad debt provision in our forecast, but
finally excluded it after no creditors had presented themselves). Moreover, we
may revise down the fair value because the current value has included bad
debt provision of only B3.3bn, less than the informed loss of B10bn.
Additionally, The establishment of the infrastructure fund might be delayed;
TTTBB is directly related the fund because it is the owner of the asset that JAS
intended to sell into the fund. Therefore, there is low probability for SEC to
approve the establishment of the fund. In the worst-case scenario that JAS
loses the lawsuit and has to transfer 69.4% of TTTBB’s total paid-up shares to
TT&T, JAS’s profit is expected to contract significantly because TTTBB is one
of JAS’s subsidiaries that generate most of JAS’s income.
- Pressured by legal cases. Downgrade to SELL
While we are reviewing our forecast, in order to avoid risk from the
threatening legal cases we downgrade our recommendation from HOLD to
SELL
