IFA Sees JAS Transaction of OFC Worth ฿38bn Appropriate, Advising Shareholders to Approve

On August 15, 2019, the Board of Directors had approved the disposal of the Optical Fiber Cables (OFCs) in an amount of approximately 700,000 core km. (Additional OFCs) whereby Triple T Broadband Public Company Limited (TTTBB), which is the subsidiary of JAS, intends to sell the Additional OFCs to the Fund with the transaction value of approximately THB 38,000 million.

Moreover, JAS asserted that JAS wished to subscribe for the newly-issued investment units of the Fund in proportion to its unitholding percentage in the Fund. JAS may subscribe for the newly-issued investment units more than the rights to which it is entitled. Nevertheless, JAS will subscribe for the newly-issued investment units in the maximum amount of not exceeding 33% of the total investment units of the Fund after the capital increase.

 

JAS had approved OptAsia Capital Co., Ltd. as the independent financial advisor for providing opinion regarding the entering into of the acquisition and disposal of assets transactions.

Considering the appropriateness and condition of this transaction, the Independent Financial Advisor has used the Discounted Cash Flow Approach to consider the appropriateness of asset disposition. Thus, the value of the OFC in this transaction is in the range of 35,643.08 – 39,009.66 Million THB which is close to the value of disposition, amounting 38,000 Million THB, Moreover, the Independent Financial Advisor has calculated the Net Present Value (NPV) after deducting the initial and additional fund expense along the 30 years useful life, the NPV is in the range of 38,576.37-42,724.99 Million THB which is more than or equal to zero. Therefore, the Independent Financial Advisor has an opinion that this transaction is appropriate.

 

The asset acquisition consists of lease transaction from the Fund and the investment unit subscription transaction of the Fund with details are as follows;

1) Additional Lease Agreement total of 700,000 core kilometers consists of rental fee, other expense and maintenance revenue. The Independent Financial Advisor has evaluated by Discounted Cash Flow Approach, including the sensitivity analysis that has 2 cases which are Lease Agreement Term and 30 Years of OFC’s Useful life.

The Independent Financial Advisor has evaluated and resulted in the range of 27,411.15 – 40,793.65 Million THB. The Independent Financial Advisor has an opinion that the transaction is appropriate and in the range of disposition asset value of 38,000 Million THB.

2) Extension of Initial Main Lease Agreement that will expire on 22 February 2026, and the term will be extended to 29 January 2032. The Independent Financial Advisor has an opinion that the projection of asset disposition for 2nd case of 30 years (2019-2049) which is the case that EBITDA has been deducted by the total rental fee from initial asset and additional asset, also covers the extension of initial main lease agreement period (2026-2032).

Moreover, the projection of asset disposition for 2nd case has the present value of free cashflow equals to 40,574 Million THB that is positive. Therefore, the extension of initial main lease agreement does not give the negative impact to JAS and the Independent Financial Advisor has an opinion that the transaction is appropriate for JAS.

3) Granting the right to the Fund for main lease agreement extension for another 10 years. The Independent Financial Advisor has projected the revenue in 2030, including the Sensitivity Analysis about the growth in revenue which there is a low opportunity that the revenue in 2030 will be in the condition of revenue of 40,0000 Million THB.

Thus, the Independent Financial Advisor also has an opinion from AMR Asia documents that TTTBB can build, laydown and install the optical fiber cable within 18 months with the cost approximately 9,480 Million THB on the same route with the Fund. Therefore, if TTTBB does not extend the main lease agreement for another 10 years, will have a low impact on JAS.

 

The Appropriateness of the Investment Unit Subscription Transaction of the Fund The Fund will increase the capital which the offering price to the unitholders is done by book building that depends on many factors which JAS has no control over the price. The offering price will depend on the market mechanism. The amount of money that JAS has to invest in order to subscribe 19.00%-33.00% expects to be in the range of 4,275.00-16,088.00 Million THB. The Independent Financial Advisor has an opinion that the transaction is appropriate for JAS.

Therefore, when considered the information of advantages and benefit analysis enter into the transaction and disadvantages and risks enter into the transaction. JAS group will receive the long-term benefit from enter into the transaction. The Independent Financial Advisor has an opinion that the shareholders should vote to approve the entering into this acquisition and disposition of asset.