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ASEAN STOCK WATCH Asean Affairs   4  February 2011

ASEAN Will Trade Higher on Thin Trade

Shayne Heffernan

ASEAN markets will be very thinly traded today, most are closed for Chinese New Year.

Those that are open will trade higher after a strong turnaround in Overnight trading.

The Stock Exchange of Thailand (SET) composite index went up 2.76 points or 0.28 percent to close at 980.60 points at the end of trading session on Thursday afternoon. The trade value was 15.27 billion baht.

IVL closed at 42.50 baht, up 3.00 baht (7.59 percent)

PTL closed at 31.50 baht, up 3.25 baht (11.50 percent)

PTT closed at 345.00 baht, up 1.00 baht (0.29 percent)

PTTEP closed at 168.00 baht, up 1.00 baht (0.60percent)

PTTCH closed at 145.50 baht, down 0.50 baht (0.34 percent)

Chutinush Taksinapinunt Interviews Joint Vice President of Indorama Ventures Public Company Limited, Ashok Jain.

LTN: How is the integration of SK Eurochem Sp , Grupo Arteva S. de R.L. de C.V. and Guangdong Shinda UHMWPE Co. Ltd. Proceeding, how much will those acquisitions impact the 2011 earnings.

Ashok Jain: The integration of SK Eurochem Sp , Grupo Arteva S. de R.L. de C.V. and Guangdong Shinda UHMWPE Co. Ltd. is in progress, has not been completed. It will be complete in Q1 and will impact earnings from Q2. We also plan to grow in the business, at the moment in 2010 the capacity is 3.2 MMt but we expected to 5.3 MMt by Q1’11 and 5.8 MMt by end of 2011. And further expand to at least 10 MMt by 2014.

LTN: How much of the $3.8B US$ expansion budget will be spent in 2011. Ashok Jain: Out of $3.8B US$,

• $0.9B for transactions signed in 2H’10 and closing by 1Q’11 (either spent already or financing committed)

• Balance of $2.9B will be spent 2011 to 2014 (financed through rights issue proceeds, debt and internally generated cashflow)

• No plan for additional equity issuance

• Maintain net debt-to-equity ratio of c 1.0x (some quarter after acquisition may temporarily exceed this)

• Intend to maintain 30 percent dividend payout policy

LTN: What do you expect revenue to grow by in 2011.

Ashok Jain: In the current year, it should be 70 percent with the increasing capacity from 3.2 MMt to 5.8 MMt

LTN: Where are you focused in terms of acquisition targets, industry, and country?

Are the Middle East and India still high on your list.

Ashok Jain: We will expand and grow our business in PET, 2011-2014 we have one project Greenfield in India both PET and PTA and one project Greenfield in Middle East for PET and PTA together. We will acquire some PET industry in Africa and try to expand PET to Mexico. For PTA we will acquire some industry in Asia.

And for Fibre, we have plan to expand in Indonesia, one acquisition in Asia and one acquisition in Europe which will be announced in Q1.

LTN: With Cotton Prices increasing around the world are you raising 2011 earnings estimates? Ashok Jain: The share of Polyester fibre demand continues to replace cotton and other fibres. The focus of 2014, the polyester fibre demand will be 59 percent, cotton 29 percent and other fibres 12 percent so the increasing in polyester fibre demand in 4-5 percent p.a. and that demand is taken by polyester fibre. Polyester is profiting right now because of

the cotton shortage and weather condition, cotton price is increased 162% for the last six months and polyester price was increased also by 52%. At the moment, the polyester price by the demand is very strong and the margin has also increase from $300 to$400 per ton. Another factor which has positively impact price, raw material for fibre is increased from $150 to $300 per ton. LTN: How do you rate Thailand as a location to manage a Global Business?

Ashok Jain: We have everything in Thailand, manufacture, labour, raw material. We create from here and expand worldwide. Thailand is the best location.

LTN: Are you on track to dominate the industry by 2014?

Ashok Jain: We are the global polyester chain industry leader.

LTN: Do you have a revenue target for 2014?

Ashok Jain: Our goal is to grow to 10 MMt while maintain our EBITDA per tonne, improving ROCE with only modestly higher leverage.

Our current production capacity is 3.2 MMt and 2014 goal is 10 MMt Our current EBITDA is $0.4B and 2014 goal is $1.1B Our current ROCE is 16% and 2014 goal is 20 percent Our current Net Debt to Equity ratio is 1.2x and 2014 goal is 1.0x

Chutinush Taksinapinunt and Ashok Jain

Additional Information

Mr. Aloke Lohia has stated that he has no intention to sell any more shares in IVL and will subscribe fully to the allocated portion of rights issue to Indorama Resources. The big lot trade was launched with 120 million shares and upsize of up to 30 million shares but there was a strong demand from international investors of around 480 million shares and another 100 million shares from domestic institutions.

On recommendation of the placement banks, the final deal size was raised to 270 million shares. The placement of big lot was 240 million shares to international institutions and 30 million shares to domestic institutions. We have received updates of follow-on buying by international investors from the secondary markets.

International investors are positive on IVL in view of them being fully aware of the Cotton situation and its positive impact on the Polyester Value Chain.

Further, on the business front has informed a positive outlook for year 2011 and business fundamentals remain strong in view of following:

- Demand remains strong for all products

- Cotton shortage has led to price surge for cotton, almost doubled in the last six months, has increased demand for polyester fibers and yarns. Polyester is a substitute for cotton. Polyester fibers and yarns demand has increased and also the spreads from US$ 300 per ton to US$ 400 per ton

- PTA demand has increased and also the spreads from US$ 250 per ton to US$ 350 perton. Reasons, being strong demand for PTA which is key raw material f or Polyester fibers and yarns (consumes 2/3rd of PTA) and PET polymers (consumes 1/3 rd of PET)

- PET demand remains strong and spreads are stable around US$ 220 per ton level. Able to pass through increase in raw material prices.

- Announced acquisitions will be closed in Q1, 2011 in China, Indonesia, Mexico, Poland and USA. China acquisition to be closed this week. All acquisitions funded through sanctioned bank loans and internal cash flows

- 2011 volume growth of around 70% from first full year of operations of AlphaPet, first full year impact of acquisition of plant in Italy and the acquisitions to be completed in Q1, 2011

- IVL continues to work on acquisitions and Greenfield projects which will be announced during the year

- Rights issue cash will be utilized for acquisitions and expansions to be announced

Bua Luang has informed following for Bangkok Bank Group, the rumor of selling shares in IVL by Bangkok Bank is damaging and there is no such announcement by Bangkok Bank. Bangkok Bank Group has purchased additional shares through the domestic tranche(around 10 million shares) in IVL in the big lot placement and this has been confirmed by Bua Luang in the press conference yesterday.

In Manila the Philippine Stock Exchange index was flat closing 2.52 points or 0.06 percent lower to close at 3,888.55. The broader all-share index meanwhile was up by 1.02 percent or 30.73 points to 3,064.49.

Trading volume reached 3.55 billion shares valued at P3.44 billion ($78.18 million). There were 54 advancers, 54 decliners, while 57 stocks closed flat.

Stocks in the 30-company index closed mixed but two of Philippines biggest conglomerates were among today's biggest losers.

Ayala Corp. was down by 1.95 percent, while Alliance Global Group, Inc. shed 2.36 percent of its value.

In Singapore the new budget is about to be handed down and Chutinush Taksinapinunt and Issaree Suwunnavid take a look at what to expect in the coming months.

Heffernan Capital Management believe the upcoming Singapore budget will continue to emphasise growth and transformation of the Singapore economy into a leading smart economy at the global level.

“Especially at the lower end, if we want to uplift people, the best way is to uplift their skills and redesign their jobs and improve what workers are able to do,” Prime Minister Lee Hsien Loong said on Thursday.

Mr. Lee was speaking to reporters at the Bukit Merah depot of waste management company SembWaste on the first day of the Chinese New Year, when he traditionally visits workers who perform essential duties to thank them for keeping Singapore going when most people are busy celebrating. Prime Minister Lee Hsien Loong presented traditional hongbao and mandarin oranges to some 200 waste collection truck drivers, crew and maintenance workers, tossed yu sheng and spent over an hour talking to them.

“It's an essential service - the rest of us are enjoying the festival, and being with our families, but they're working hard, keeping Singapore clean, keeping our systems going,” he said of his visit.

The Government's Budget for the coming financial year will be delivered in Parliament by Finance Minister Tharman Shanmugaratnam on February 18. The Singapore Budget is prepared for every financial year, which begins on April of every year. For example, the 2011 Singapore Budget is for the period 1 April 2011 to 31 March 2012.

The Budget shows:

Approved expenditures and the usage of government funds of the past financial years and planned government revenue and expenditures for the following financial year.

The annual budgeting process takes place in the following steps:

The Minister for Finance will present the Government-approved Budget to the Parliament before the new financial year begins. For Budget 2011, that will take place in February 2011. Members of Parliament will then ask questions on the past expenditure of the funds during the Budget Debate and Committee of Supply sessions. They will also debate on the proposed Budget for the following financial year.

Once the Parliament agrees with the proposed budget, it will give its approval by passing the Supply Bill. The President will then need to give his assent to the Supply Bill to allow the Bill to come into effect.

If the President gives his assent to the Supply Bill, it is then enacted as law known as the Supply Act. The Supply Act controls the government’s spending in the following financial year.

"After a good year last year, the government has more scope to help implement schemes to help Singaporeans cope with rising costs, especially lower-income households," he said. Lee said the strong Singapore dollar has helped lower the cost of imported goods in Singapore dollars recently, adding that he expected inflation to be somewhat higher over the next few months but stablize later this year.

Singapore saw a record economic growth of 14.7 percent last year, but CPI also rose to 4.6 percent in December last year.

The government is expected to announce measures to help lower- income households in its budget proposals due out in mid-February. Lee also said that the government "do more to stablize the ( property) market if and when this becomes necessary" to keep housing affordable to Singaporeans, especially public housing. Housing prices of both government-built flats and private properties rose significantly over the past year. The government has announced rounds of cooling measures. The prime minister also touched on the issue of coping with fast changes in the society as Singapore leapt to be an industrialized country with an influx of immigrants.

He said Singaporeans must hold fast to the core values which help Singapore to succeed, the heritage and cultures and the national cohesion and spirit, which enabled Singapore to overcome crises.

"Some Singaporeans are concerned about the rapid changes in our society, and feel a sense of dislocation and unfamiliarity," he said. "We will manage the pace of change, so that we keep our bearings, sense of place, and sense of belonging. But we cannot stay static."

"We are managing the inflow of foreigners who want to live and work here. Many want to become permanent residents and new citizens, but we will only select those who can add value to Singapore," he said.

He said Singaporeans need to produce enough babies to achieve self-replacement, as the city state's fertility rate dropped to a record low of 1.16 last year, with an even lower 1.02 for the majority Chinese population.

Our Hot List today features Singapore listed food companies Olam International, Noble Group, Wilmar International. They also happen to be some of the largest food companies in the world.

Singapore listed commodities companies are set to become the rising stars of the exchange in 2011 and will become global players of significant importance.

Singapore’s Straits Times Index gained 0.2 percent 3,184.74.

Olam International Ltd, Wilmar International Ltd and Noble Group Ltd are most likely to lead the charge as the benefit from home grown markets in ASEAN, China and India,where the world's largest populations are consuming more and more of the world’s food supply.

Cash Flow is on the rise at Noble and Olam, both have successfully made the switch into production from trading, have been expanding ever since.

Olam is the world's largest supplier of cashews and sesame seeds, and is among the biggest sources of cocoa, rice, peanuts and cotton. It operates in 64 countries.

Noble is Asia's biggest supplier of raw materials. Only 22 percent of its revenue comes from agriculture, with the remainder coming from materials such as iron ore. It has invested heavily in mines and processing.

Wilmar is Asia's leading agribusiness group and the world's largest integrated palm oil company.

Golden Agri-Resources Ltd is the world's second largest palm oil plantation with a total planted area of 435,000 hectares (including small holders) as at 30 September 2010, located in Indonesia. It has integrated operations focused on the production of palm-based edible oil and fat products.

Demand is expected to grow because of demand for biofuels, which is part of the reason the company bought the sugar and renewable energy businesses from Australia's CSR.


Shayne Heffernan brings more than 25 years of trading experience in Asia and hands on experience in Venture Capital, he has been involved in several start ups that have seen market capitalization over US$500m and 1 that reach a peak market cap of US$15billion. He has managed and overseen start-ups in Mining, Shipping, Technology and Financial Services.


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This year in Thailand-what next?

04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

The first issue that can’t be answered is the health of Thailand’s beloved King Bhumibol, who is now 83 years old. He is the world's longest reigning monarch, but elaborate birthday celebrations in December failed to mask concern over his health. More

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