Description

Thesis:

 

AWRCF was prohibited from filing consolidated financials due to a dispute with one board member who controlled 20% of the company.  With the recent sale by this director of his 20% stake to a US institutional investor (see filings), all lawsuits have been dropped.  Now that the lawsuits have been dropped, the company should be filing audited financials for the present time period back to 2004.  I believe the consolidated revenue for this Company could be significantly higher than their 2005 consolidated revenue of $341mm given the large increase in the copper price and expansion of Asian economies.  I will make some simple assumptions below that will demonstrate why this company could be a multi-bagger once the financial statements are filed.

 

 

Introduction:

 

Asia Pacific Wire & Cable manufactures wire and cable products throughout Asia.  It is a profitable company, very similar to General Cable Corp (BGC), yet it trades at .20x revenue versus 1.0x revenue for BGC.  The Company has manufacturing operations in Thailand, Shenzhen China, and Brisbane, Australia.  The 54% owned subsidiary of AWRCF is a publicly listed company in Thailand, Charoong Thai Wire & Cable  (CTW Bangkok exchange).  In 2006 CTW earned approximately 523 mm baht or $13.8mm at an average exchange rate in 2006 of 37.91 Baht per US$.  The current baht exchange rate is 29.81 Baht per dollar.  

 

 

Subsidiary Descriptions:

 

Charoong Thai Wire & Cable   CTW Bangkok Exchange   54% owned

Bangkok, Thailand

www.ctw.co.th

 

CTW is one of the largest manufacturers of Wire & Cables in the Thai market.  CTW manufactures a wide range of products including, enameled wire, high and low voltage wire & cable products, and telecommunication wire.  CTW sells to the Thai Government, the domestic electronics industry, and the domestic telecommunications industry.  

 

 

Pacific Electric Wire & Cable (Shenzhen Co., LTD)  PEWSC  100% owned

Shenzhen China

 

PEWSC manufactures enameled wire for the manufacturing industry in the Shenzhen area.  The major component of their wire is copper and they pass the majority of the cost onto their customers.  

 

Australia Pacific Electric Wire & Cable  APAC 100% owned

 

APAC is a manufacture of wire & cable for the power and communications industry in Australia. 

 

Other smaller subsidiaries

 

The Company has some smaller subsidiaries in Shanghai and Ningo, China.  In Singapore they also have an operation that manufactures cable and does some design and installation of power cables for the government.  I believe most of these are somewhat insignificant so I focus on the three subsidiaries with the most information.   

 

 

Financial:

 

AWRCF has not released full audited financials since 2003 when they had revenue of $211mm and net income of $10mm.   The Company has released preliminary financials for 2005 and the Thai subsidiary is a publicly reporting company so I will work off of those two pieces of data to estimate 2005 and 2006 numbers.  

 

2005  from June 30, 2006 Press Release:

 

Income Statement

 

2005 Numbers 

Consolidated Revenue $341mm  

Gross Profit  $37.9mm

 

Individual Subsidiaries

Australian Pacific Electric Cables ltd. (Australian Subsidiary) (100% owned)

Revenue   $33.9mm rev    Net Income $682k

 

Charoong Thai Wire & Cable (Thai Subsidiary)  54% owned

Revenue  $157.2 mm rev     Net Income $8mm

 

Pacific Electric and Wire (Shenzhen) 100% owned

Revenue $50.2mm               Net Income  $3.37mm

 

 

Balance Sheet  from June 30, 2006 Press Release

 

Cash and short term bank deposits

$40mm

Bank debts, accounts payable, related party debt

$76.3mm

 

Charoong Thai Wire & Cable 2006 numbers:

 

Rev  9,911,055,615 Baht   2006 Average Exchange Rate 37.914*

=  USD Revenue of $261mm

 

Net Income    523,089,547 Baht   Average Exchange Rate 37.914*

= USD Net Income $13.8mm  

 

I used the average USD/THB exchange rate for the 2006 Year.  Since then the Thai Baht has appreciated significantly and the current rate is 29.81

 

As these numbers are all I have to work with, I take the 2005 numbers for the Australian & Chinese Sub and add those to the 2006 numbers for the Thai Sub taking into account the respective ownership.  

 

2005 Net income

Australia   682k

China        $3.37mm

 

2006 Net Income

Thailand   $7.45mm

 

In round numbers it seems very feasible you have at least $11mm in net income or .79 EPS.  One must take into account that the average copper price in 2006 was $6,768 per metric ton vs $3553 in 2005 when estimating future numbers.  

 

Valuation:

 

EPS                                         Revenue

Low:    .79                               $450mm

Mid     1.00                              $500mm

High    1.20                              $550mm  

 

 

EPS Multiple	10x	15x	20x
2006 EPS
$ 0.80	$  8.00	$ 12.00	$ 16.00
$ 1.00	$ 10.00	$ 15.00	$ 20.00
$ 1.20	$ 12.00	$ 18.00	$ 24.00
Price Sales Multiple	0.20x	0.40x	0.60x
2006 Sales
$      450,000,000	$ 6.52	$13.04	$19.57
$      500,000,000	$ 7.25	$14.49	$21.74
$      550,000,000	$ 7.97	$15.94	$23.91

 

  

Comps:

 

BGC      General Cable Corp        1.0x rev

FSIN      Fushi International Inc.   3.4x rev

WIRE    Encore Wire                   .60xx rev

  

Catalyst:

 

The company has announced that they will be holding their annual meeting on Sep 7, 2007.  In 2006 when they tried to have their annual meeting they released their preliminary 2005 numbers.   Any thing that points to verifying these numbers should attract more interest in the stock.  

Catalyst

The company has announced that they will be holding their annual meeting on Sep 7, 2007. In 2006 when they tried to have their annual meeting they released their preliminary 2005 numbers. Any thing that points to verifying these numbers should attract more interest in the stock.