With the recently annoucement from Tienwah, which has been awarded the tender to acquire BAT Indonesia printing business with amounting RM96.9 million and with a contract of 6 years to supply printing service to BAT Indonesia.
What does it tell you anything from this info?
BAT Indonesia market value around RM750 million ~ RM800 milliom
TienWah Malaysia market value around RM200 million
BAT Indonesia has been loss making for past 3 years, amounting RM500 million each year
BAT Indonesia has issued private placement to raise up RM4.515 billion, at which RM3.87 billion (around 86% of the private placement) was used to pay outstanding default loan. The loan was called default and been settled up fully on Jun year 2016.
The followings are my assumption:-
1. BAT Indonesia is loss making, so it requires money to support its business cash flow. Hence propose to sell its subsidiary printing business.
2. Tienwah beg for renewal of contract of printing. Hence it is willing or force to help BAT Indonesia in order to secure the contract. By the way, it is win-win situation. Both get what they want. BAT Indonesia get the cash flow. Tienwah get the opportunity to tap into Indonesia's market.
3. Tienwah definately will secure the renewal of 3 years contract. As it should be a part of agreement for Tienwah to buy BAT Indonesia printing business.
Tienwah's market value is only RM200 million, but it invest RM96.9 million into new market. So do you see the number?
Next I will write out on Tienwah's intrinsic value. Stay tune.