TPI polene shares plunge over court verdict fears

Brokers recommended that investors avoid piling up the stock due to the lingering uncertainty from the pending appeal process after the Criminal Court ruled to fine the com¬pany Bt6.9 billion for stock manipu¬lation.

The stock began yesterday with a sharp decline and headed south fur¬ther to the day's trough at Bt4.04 before retreating to end at Bt4.20, a 11.76percent drop.

TPI Polene has ended up in the red, with a net loss of Bt6.82 billion and Bt5.91 billion in its consolidated sec¬ond quarter and firsthalf earnings respectively.

The massive loss could be ascribed to the company's provision for the Bt6.9billion fine to comply with the court's verdict. The company is in the appeal process.

As of June 30, 2008, TPI Polene's consolidated assets amounted to Bt75.29 billion, liabilities were Bt24.35 billion and shareholders' equity Bt50.94 billion.

An analyst at KGI Securities (Thailand) issued a warning that TPI Polene might face a liquidity crunch if the company has to pay the fine though it had already booked the provision for the fine as it had Bt4 billion in earnings before interest, tax, depreciation and amor¬tisation.

It was very difficult for the compa¬ny to seek loans to pay the fine as it was seeking around Bt7 billion in loans from financial institutions to refinance its debt as part of its reha¬bilitation plan, the analyst said.

Syrus Securities said in a note that investors should avoid snapping up TPI Polene stock, though the current market price was below its book value at Bt9.20 each as of June 30, 2008 and its fair value at Bt8.50 as the stock carried high risk from the court case.

The company's secondhalf per¬formance growth would not be sig¬nificant as demand for cement, which is TPI Polene's core product, was like¬ly to be weak due to the upward inter¬est rate trend, the political instability and possibility of postponement of the government's megaprojects, the bro¬ker said.

Moreover, the spread for petro¬chemical products was likely to drop further due to the new supply coming on stream in the second half of this year, the broker added.