• 
• 

Published on December 5, 2007

The share price of TPI Polene (TPIPL) plunged to the floor yesterday, amid in-vestor concerns over hefty fines against the company following a court verdict and despite the company's pledge to appeal the judgement.

The stock fell Bt3.95 or 29.92 per cent to Bt9.25.

TPIPL shares resumed trading in the afternoon after the cement firm notified the Stock Exchange of Thailand of its decision to appeal against the Criminal Court's judgement.

TPIPL was fined Bt6.9 billion on Monday for violation of the securities law in 2004, while its founder Prachai Leophairatana was sentenced to a three-year jail term without probation.

"The judgement imposing a fine against the company and the punishment against Prachai Leophairatana, as a director of the company, shall not have any effect on the management and operation of the company," senior executive vice president Orapin Leophairatana said.

"The company does not have to pay any fine unless a final judgement is delivered that the defendants have committed offences."

At a separate event, Prachai - leader of the Matchima Thipataya Party - said he would fight the verdict, which bars him from holding a Cabinet post.

Despite a negative short-term outlook, securities houses still believe TPIPL will weather the storm because of its huge capital base. As the case will take years to reach the final stage, even if the company has to pay the fine, it will have time to raise the necessary funds.

However, in the short term, the company could face risks related to its ongoing debt restructuring.

Brokerage houses expect the company to set aside reserves for the Bt6.9-billion fines in the current quarter. They also expect the reserves to hit the firm's financial position, and recommend investors to sell the stock.

Asia Plus Securities said in a report that the reserve would push TPIPL into the red to the tune of Bt2.55 billion. It made a net profit of Bt4.53 billion in the first nine months of the year.

The securities firm also expects an impact on the company's ongoing Bt8.44-billion debt restructuring as well as other investment plans. TPIPL plans to refinance its Bt8.44-billion debts by the end of the year.

Kim Eng Securities (Thailand) said that if TPIPL were required to pay the fine now, its debts would rise to Bt21 billion while the delayed debt restructuring would increase its interest expenses. While interest costs were estimated at Bt586 million this year, the amount would rise to Bt1.33 billion. This would deplete the company's 2008 earnings to Bt1.41 billion from the earlier estimate of Bt2.15 billion.

"Although the ruling will not have an impact on the company's existing operation, it would impact the fair value," said Credit Lyonnais Asia Securities.

"It is true that the case will be appealed and the Bt6.9-billion fine is not a certainty. However, the worst-case scenario here is for the company to be fined this much, and that is equivalent to Bt3.40 per share against our previous fair price of Bt20 a share."

The securities house cut TPIPL's target price down to Bt12, taking into account the fine of Bt3.40 per share.

The Nation