BANGKOK--JUL 18--TRIS
THAI RATING AND INFORMATION SERVICES (TRIS), ANNOUNCED THURSDAY,
18 JULY 1996, AN ASSIGNED "BB+" RATING FOR THE 600 MILLION BAHT SENIOR
DEBENTURE OF THAI-GERMAN PRODUCTS PLC (TGPRO). THIS BASED THE RATING ON
FAVORABLE INDUSTRY FUNDAMENTALS AND THE COMPANY'S STRONG BUSINESS POSITION
WITH BROAD PRODUCT DIVERSITY AND MARKET DOMINANCE. THESE STRENGTHS ARE
SOMEWHAT OFFSET BY ITS HIGH FINANCIAL RISK REGARDING AGGRESSIVE EXPANSION
IN ITS RAYONG PROJECT AND A CONCERN OVER VOLATILITY IN RAW MATERIAL
PRICES.
DEMAND FOR STAINLESS STEEL PIPE HAS SHOWN SATISFACTORY GROWTH OVER
THE PAST FIVE YEARS AND IS LIKELY TO CONTINUE. FLUCTUATION IN RAW
MATERIAL PRICES AND THE VAGARIES OF ENDUSERS CREATE CYCLICALITY. DESPITE
LOW BARRIERS TO ENTRY AND THE COMMODITY NATURE OF THE PRODUCT, COMPETITION
IS MODERATE BECAUSE OF THE LIMITED CAPACITY OF DOMESTIC PRODUCERS.
HOWEVER, IT IS EXPECTED TO INTENSIFY DUE TO A LATIFF REDUCTION ENCOURAGING
MORE IMPORTS.
TGPRO IS A MARKET LEADER AMONG DOMESITC STAINLESS STEEL PIPE
MANUFACTURES WITH A 23% MARKET SHARE. SYNERGIES BETWEEN ITS MANUFACTURING
PRODUCTION AND THAT OF SIAM STAINLESS PIPE FITTING CO., LTD. (SPF), A PIPE
AND SHEET MANUFACTURER, A TGPRO SUBSIDIARY, HAVE HELPED TGPRO ENTER
HIGHER-MARGIN NICHE MARKETS. A DIVERSIFIED CUSTOMER BASE WOULD STABILIZE
ITS REVENUE STREAMS. COMPETITIVE ADVANTAGES STEM FROM A BROAD PRODUCT
LINE, LONG-STANDING CUSTOMER RELATIONSHIPS AND TECHNICAL EXPERTISE AND
SUPPORT TO CUSTOMERS. TGPRO HAS TRIED TO ALLEVIATE RISKS BY SIGNING A
LONG-TERM PURCHASING CONTRACT FOR RAW MATERIALS ON A VOLUME BASIS; STILL,
IT IS SUSECEPTIBLE TO CYCLICAL CHANGES IN PRICES ON THE WORLD MAKET. WITH
A STRATEGY FOR IMPORT REPLACEMENT AND EXPORT POTENTIAL, THE NEWLY-
CONSTRUCTED RAYONG PLANT (PHASE 1 AND 2) HAS BEEN SET UP, PROVIDING A
FOUR-FOLD PRODUCTION CAPACITY OF PIPES AND SHEETS, MAINLY IN NEW PRODUCT
LINES. THIS INCREMENTAL CAPCITY TOGETHER WITH TGPOR'S EXTENSIVE
DISTRIBUTION NETWORK WILL STRENGTHEN TGPRO'S MARKET COMPETITIVENESS.
CURRENTLY, PHASE 1 IS IN OPERATION. PHASE 2 IS UNDER CONSTRUCTION WITH
43% COMPLETE AND EXPECTED TO START PRODUCTION IN MAY 1997.
TGPRO CONTINUES EXTENSIVE EXPANSION, LARGELY FINANCED WITH BEDT,
RESULTING IN A HIGHLY LEVERAGED BALANCE STEET AND WEAK CASH FLOW
PROTECTION. REGARDING POSITIVER MARKET FUNDAMENTALS, THE COMPANY SHOULD
CONTINUE TO GENERATE SUFFICIENT CASH FLOW TO COVER ALL FINANCING CHARGES.
HOWEVER, ITS ONEROUS INTEREST BURDEN WILL CONSTRAIN ITS FINANCIAL STANDING
IN THE NEAR TERM. OVER THE INTERMEDIATE TERM, TRIS ANTICIPATES TGPRO WILL
CONTINUE IMPROVING ITS BUSINESS FUNDAMENTALS WITHOUT ADDING MEANINGFUL
FINANCIAL EXPOSURE. END.
THAI RATING AND INFORMATION SERVICES (TRIS), ANNOUNCED THURSDAY,
18 JULY 1996, AN ASSIGNED "BB+" RATING FOR THE 600 MILLION BAHT SENIOR
DEBENTURE OF THAI-GERMAN PRODUCTS PLC (TGPRO). THIS BASED THE RATING ON
FAVORABLE INDUSTRY FUNDAMENTALS AND THE COMPANY'S STRONG BUSINESS POSITION
WITH BROAD PRODUCT DIVERSITY AND MARKET DOMINANCE. THESE STRENGTHS ARE
SOMEWHAT OFFSET BY ITS HIGH FINANCIAL RISK REGARDING AGGRESSIVE EXPANSION
IN ITS RAYONG PROJECT AND A CONCERN OVER VOLATILITY IN RAW MATERIAL
PRICES.
DEMAND FOR STAINLESS STEEL PIPE HAS SHOWN SATISFACTORY GROWTH OVER
THE PAST FIVE YEARS AND IS LIKELY TO CONTINUE. FLUCTUATION IN RAW
MATERIAL PRICES AND THE VAGARIES OF ENDUSERS CREATE CYCLICALITY. DESPITE
LOW BARRIERS TO ENTRY AND THE COMMODITY NATURE OF THE PRODUCT, COMPETITION
IS MODERATE BECAUSE OF THE LIMITED CAPACITY OF DOMESTIC PRODUCERS.
HOWEVER, IT IS EXPECTED TO INTENSIFY DUE TO A LATIFF REDUCTION ENCOURAGING
MORE IMPORTS.
TGPRO IS A MARKET LEADER AMONG DOMESITC STAINLESS STEEL PIPE
MANUFACTURES WITH A 23% MARKET SHARE. SYNERGIES BETWEEN ITS MANUFACTURING
PRODUCTION AND THAT OF SIAM STAINLESS PIPE FITTING CO., LTD. (SPF), A PIPE
AND SHEET MANUFACTURER, A TGPRO SUBSIDIARY, HAVE HELPED TGPRO ENTER
HIGHER-MARGIN NICHE MARKETS. A DIVERSIFIED CUSTOMER BASE WOULD STABILIZE
ITS REVENUE STREAMS. COMPETITIVE ADVANTAGES STEM FROM A BROAD PRODUCT
LINE, LONG-STANDING CUSTOMER RELATIONSHIPS AND TECHNICAL EXPERTISE AND
SUPPORT TO CUSTOMERS. TGPRO HAS TRIED TO ALLEVIATE RISKS BY SIGNING A
LONG-TERM PURCHASING CONTRACT FOR RAW MATERIALS ON A VOLUME BASIS; STILL,
IT IS SUSECEPTIBLE TO CYCLICAL CHANGES IN PRICES ON THE WORLD MAKET. WITH
A STRATEGY FOR IMPORT REPLACEMENT AND EXPORT POTENTIAL, THE NEWLY-
CONSTRUCTED RAYONG PLANT (PHASE 1 AND 2) HAS BEEN SET UP, PROVIDING A
FOUR-FOLD PRODUCTION CAPACITY OF PIPES AND SHEETS, MAINLY IN NEW PRODUCT
LINES. THIS INCREMENTAL CAPCITY TOGETHER WITH TGPOR'S EXTENSIVE
DISTRIBUTION NETWORK WILL STRENGTHEN TGPRO'S MARKET COMPETITIVENESS.
CURRENTLY, PHASE 1 IS IN OPERATION. PHASE 2 IS UNDER CONSTRUCTION WITH
43% COMPLETE AND EXPECTED TO START PRODUCTION IN MAY 1997.
TGPRO CONTINUES EXTENSIVE EXPANSION, LARGELY FINANCED WITH BEDT,
RESULTING IN A HIGHLY LEVERAGED BALANCE STEET AND WEAK CASH FLOW
PROTECTION. REGARDING POSITIVER MARKET FUNDAMENTALS, THE COMPANY SHOULD
CONTINUE TO GENERATE SUFFICIENT CASH FLOW TO COVER ALL FINANCING CHARGES.
HOWEVER, ITS ONEROUS INTEREST BURDEN WILL CONSTRAIN ITS FINANCIAL STANDING
IN THE NEAR TERM. OVER THE INTERMEDIATE TERM, TRIS ANTICIPATES TGPRO WILL
CONTINUE IMPROVING ITS BUSINESS FUNDAMENTALS WITHOUT ADDING MEANINGFUL
FINANCIAL EXPOSURE. END.