BANGKOK--JAN 20--TRIS
THAI RATING AND INFORMATION SERVICES (TRIS), ANNOUNCED, 20 JANUARY
1997, THE "BBB-" RATING FOR 600 MILLION BAHT SENIOR DEBENTURES OF THAI
ENGINE MANUFACTURING PUBLIC COMPANY LIMITED (TEM). ACCORDING TO TRIS, THE
RATING REFLECTS TEM'S EFFECTIVE MARKET PENETRATION STRATEGY, WHICH
CONSIDERABLY IMPROVED ITS MARKET POSITION, ITS FAVORABLE PROFITABILITY AND
MODERATE CAPITAL STRUCTURE FROM CONTINUOUSLY INCREASING PAID-UP CAPITAL.
HOWEVER, TEM'S SHORT OPERTIONAL TRACK RECORD RAISES CONCERNS ABOUT ITS
ABILITY TO MEET CHALLENGES FROM COMPETITORS AND COPE WITH FUTURE
INDUSTRIAL CYCLICALITY ASSOCIATED WITH FLUCTUATING AGRICULTURAL PRICES AND
PRODUCTION.
TEM IS ONE OF THAILAND'S THREE SMALL DIESEL ENGINE MANUFACTURERS,
MANUFACTURING SMALL ENGINES UNDER THE BRAND NAME OF MITSUBISHI. SINCE ITS
BEGINNING IN 1991, THE COMPANY HAS EFFECTIVELY PENETRATED THE MARKET
CAPTURING A 24% SHARE AND BECOMING THE NUMBER TWO SMALL DIESEL ENGINE
MAKER. ITS MAIN PRODUCT LINE COMPRISES SEVERAL SIZES OF DIRECT-INJECTION
DIESEL ENGINES RANGING FROM 7 TO 11 HORSEPOWER. THESE PRODUCTS ARE WELL
ACCEPTED FOR SMOOTH RUNNING AND COMPARATIVELY LOW FUEL CONSUMPTION. THE
COMPANY QUICKLY ESTABLISHED PRODUCT QUALITY AND GAINED ACCEPTANCE FROM
CUSTOMERS THROUGH STRONG TECHNICAL ASSISTANCE FROM MITSUBISHI CORPORATION.
AMPLE AND CREDIBLE AFTER-SALES SERVICE PROVISIONS AND BROAD DISTRIBUTION
NETWORK ALSO GENERATED BRAND AWARENESS AND LOYALTY AMONG FARMERS. THE
COMPANY EXPORTS SOME PRODUCTS TO COUNTERBALANCE ITS FLUCTUATING DOMESTIC
SALES. AS OF SEPTEMBER 1996, EXPORT SALES ACCOUNTED FOR 16.3% OF TOTAL
SALES. STILL, THERE ARE SIGNIFICANT RISKS ASSOCIATED WITH FAST GROWTH IN
THIS FIELD. THE COMPANY WILL BE CHALLENGED TO CONTROL ITS PRESENT
OPERATIONS WHILE ATTENDING TO ITS EXPANSION. TEM NEEDS TO DEVELOP THOSE
MANAGEMENT CAPABILITIES TYPICALLY REQUIRED OF AN EXPANDING ORGANIZATION,
WHILE THE POTENTIAL FOR INCREASING COMPETITION FROM LARGER ENTITIES POSES
UNCERTAINTY.
DESPITE FLUCTUATUINS, DEMAND FOR SMALL DIESEL ENGINES IS FORECAST
TO TREND UPWARD AS THE PURCHASING POWER OF FARMERS INCREASES AND AS
MACHINES REPLACE LABOR. IN LINE WITH INDUSTRY TRENDS AND ITS LOW COST
PRODUCTION STRATEGY, TEM PLANS TO INVEST SIGNIFICANTLY DURING THE NEXT TWO
YEARS TO EXPAND ITS PARTS-MACHINING LINE AND ITS PRODUCT LINES WITH HIGHER
HORSEPOWER ENGINES AND AGRICULTURAL EQUIPMENT. TEM'S FINANCIAL
PERFORMANCE DEMONSTRATED FAVORABLE MARGINS AND DRAMATIC INCREASES IN THE
REVENUE AND ASSET BASE, TYPICAL OF A RAPIDLY GROWING START-UP COMPANY.
PROCEEDS FROM THIS 600 MILLION BAHT ISSUE WILL BE USED TO REFINANCE BANK
BEDT AND FOR BUSINESS OPPORTUNITIES. PROFORMA DEBT WILL COMPRISE ABOUT
37% OF THE CAPITAL BASE, AND CASH FLOW WILL BE AROUND 42% OF THE DEBT
LOAD. GIVEN ITS SHORT HISTORY AND POSSIBLE FUTURE MOVES FROM COMPETITORS,
TEM'S INTENTION AND ABILITY TO MAINTAIN A CONSERVATIVE FINANCIAL STRUCTURE
WILL BE IMPORTANT ELEMENTS IN ITS CREDIT QUALITY. END.
NOTE: THAI ENGINE MANUFACTURING PLC (TEM) TRIS'S RATING
600 MB SR DEBS BBB-
THAI RATING AND INFORMATION SERVICES (TRIS), ANNOUNCED, 20 JANUARY
1997, THE "BBB-" RATING FOR 600 MILLION BAHT SENIOR DEBENTURES OF THAI
ENGINE MANUFACTURING PUBLIC COMPANY LIMITED (TEM). ACCORDING TO TRIS, THE
RATING REFLECTS TEM'S EFFECTIVE MARKET PENETRATION STRATEGY, WHICH
CONSIDERABLY IMPROVED ITS MARKET POSITION, ITS FAVORABLE PROFITABILITY AND
MODERATE CAPITAL STRUCTURE FROM CONTINUOUSLY INCREASING PAID-UP CAPITAL.
HOWEVER, TEM'S SHORT OPERTIONAL TRACK RECORD RAISES CONCERNS ABOUT ITS
ABILITY TO MEET CHALLENGES FROM COMPETITORS AND COPE WITH FUTURE
INDUSTRIAL CYCLICALITY ASSOCIATED WITH FLUCTUATING AGRICULTURAL PRICES AND
PRODUCTION.
TEM IS ONE OF THAILAND'S THREE SMALL DIESEL ENGINE MANUFACTURERS,
MANUFACTURING SMALL ENGINES UNDER THE BRAND NAME OF MITSUBISHI. SINCE ITS
BEGINNING IN 1991, THE COMPANY HAS EFFECTIVELY PENETRATED THE MARKET
CAPTURING A 24% SHARE AND BECOMING THE NUMBER TWO SMALL DIESEL ENGINE
MAKER. ITS MAIN PRODUCT LINE COMPRISES SEVERAL SIZES OF DIRECT-INJECTION
DIESEL ENGINES RANGING FROM 7 TO 11 HORSEPOWER. THESE PRODUCTS ARE WELL
ACCEPTED FOR SMOOTH RUNNING AND COMPARATIVELY LOW FUEL CONSUMPTION. THE
COMPANY QUICKLY ESTABLISHED PRODUCT QUALITY AND GAINED ACCEPTANCE FROM
CUSTOMERS THROUGH STRONG TECHNICAL ASSISTANCE FROM MITSUBISHI CORPORATION.
AMPLE AND CREDIBLE AFTER-SALES SERVICE PROVISIONS AND BROAD DISTRIBUTION
NETWORK ALSO GENERATED BRAND AWARENESS AND LOYALTY AMONG FARMERS. THE
COMPANY EXPORTS SOME PRODUCTS TO COUNTERBALANCE ITS FLUCTUATING DOMESTIC
SALES. AS OF SEPTEMBER 1996, EXPORT SALES ACCOUNTED FOR 16.3% OF TOTAL
SALES. STILL, THERE ARE SIGNIFICANT RISKS ASSOCIATED WITH FAST GROWTH IN
THIS FIELD. THE COMPANY WILL BE CHALLENGED TO CONTROL ITS PRESENT
OPERATIONS WHILE ATTENDING TO ITS EXPANSION. TEM NEEDS TO DEVELOP THOSE
MANAGEMENT CAPABILITIES TYPICALLY REQUIRED OF AN EXPANDING ORGANIZATION,
WHILE THE POTENTIAL FOR INCREASING COMPETITION FROM LARGER ENTITIES POSES
UNCERTAINTY.
DESPITE FLUCTUATUINS, DEMAND FOR SMALL DIESEL ENGINES IS FORECAST
TO TREND UPWARD AS THE PURCHASING POWER OF FARMERS INCREASES AND AS
MACHINES REPLACE LABOR. IN LINE WITH INDUSTRY TRENDS AND ITS LOW COST
PRODUCTION STRATEGY, TEM PLANS TO INVEST SIGNIFICANTLY DURING THE NEXT TWO
YEARS TO EXPAND ITS PARTS-MACHINING LINE AND ITS PRODUCT LINES WITH HIGHER
HORSEPOWER ENGINES AND AGRICULTURAL EQUIPMENT. TEM'S FINANCIAL
PERFORMANCE DEMONSTRATED FAVORABLE MARGINS AND DRAMATIC INCREASES IN THE
REVENUE AND ASSET BASE, TYPICAL OF A RAPIDLY GROWING START-UP COMPANY.
PROCEEDS FROM THIS 600 MILLION BAHT ISSUE WILL BE USED TO REFINANCE BANK
BEDT AND FOR BUSINESS OPPORTUNITIES. PROFORMA DEBT WILL COMPRISE ABOUT
37% OF THE CAPITAL BASE, AND CASH FLOW WILL BE AROUND 42% OF THE DEBT
LOAD. GIVEN ITS SHORT HISTORY AND POSSIBLE FUTURE MOVES FROM COMPETITORS,
TEM'S INTENTION AND ABILITY TO MAINTAIN A CONSERVATIVE FINANCIAL STRUCTURE
WILL BE IMPORTANT ELEMENTS IN ITS CREDIT QUALITY. END.
NOTE: THAI ENGINE MANUFACTURING PLC (TEM) TRIS'S RATING
600 MB SR DEBS BBB-