JAS-JASIF Start the Mountain Climbing after the Announcement of ฿38bn Capital Increase!

The share price of Jasmine International Public Company Limited (JAS) and Jasmine Broadband Internet Infrastructure Fund (JASIF) both soared at the open after JASIF has announced on Wednesday, July 10, 2019 that the company would propose to the Extraordinary General Meeting of Unitholders (EGM) to consider and approve the increase of JASIF’s registered capital for the purpose of financing the acquisition of the additional assets.

JAS opened at ฿7.60/share, increased ฿0.10/share or 1.3%  higher than yesterday’s closing price while JASIF opened at ฿11.40/share, gained ฿0.10/share or 0.88%.

JASIF would propose to EGM to consider and approve the increase of JASIFs registered capital increase in the amount up to THB 24,629 million with a par value of THB 9.8516 per unit, from the current registered capital of THB 54,183,800,000 to up to THB 78,812,800,000 by way of issuing and offering up to 2,500 million newly issued units to existing unitholders.

 

As for the aforementioned investment, JASIF will make an investment in the additional infrastructure assets which are up to 700,000 core kilometres of optical fibre cables (Additional Assets) to be acquired from TTT Broadband Public Company Limited (TTTBB), a subsidiary of JASIF at the total purchase price of up to THB 38,000 million.

 

JASIF may also seek an additional loan facility of up to THB 2,660 million from local financial institution(s) for the payment of VAT applicable to the purchase of the Additional Assets. Therefore, the total amount of loan facility will be up to THB 18,160 million.

In order to guarantee JASIF’s income, 20% of the Additional Assets obtained from TTTBB, which are up to 140,000 core kilometres will be leased by TTTBB insofar as JASIF has not entered into an agreement with a third party operator to lease such assets, with a rental fee starting at THB 764.48 per core kilometre per month (VAT excluded).

However, the investment by JASIF in the Additional Assets as well as the final terms on sale and transfer agreement and other agreements relating to the investment in the Additional Assets and the seeking of benefits from the Additional Assets to be entered into by JASIF  are subject to negotiations between JASIF and the relevant parties (e.g. Jasmine International Public Company Limited (JAS), TTTBB and the lending financial institutions), necessary approvals from the board of directors, the shareholders’ meeting and/or the relevant authority as may be required by the relevant parties as well as subject to the result of legal due diligence and a technical inspection conducted on such assets. Currently, JASIF is in the process of negotiation with the relevant parties and no relevant agreement has been concluded yet.

The investment in the Additional Assets will result in the projected cash distribution per unit (DPU) not being less than the projected cash distribution per unit (DPU) in case where JASIF does not invest in the Additional Assets which has been prepared by the Management Company and audited by a certified public accountant for a one-month projection period from 1 December 2019 to 31 December 2019 and for a 12-month projection period from 1 January 2020 to 31 December 2020 and will be further circulated to the unitholders for their consideration.

 

In order to be consistent with the conditions for the investment in the Additional Assets as mentioned above, the proposal to EGM will also include the investment on the following:

1) An extension of the current term of the main lease agreement between JASIF and TTTBB, under which TTTBB leases 80% of JASIF’s total current optical fibre cables, from expiring on 22 February 2026 to expiring on 29 January 2032, the same day in which the telecommunications licence type III held by TTTBB will expire.

2) JASIF’s option to extend the term of the main lease agreement (in relation to the optical fibre cables currently invested and to be additionally invested by JASIF) for another ten (10) years from the expiry date (i.e. 29 January 2032 as set out in (1) above), if TTTBB’s service income from broadband internet (FTTX and xDSL) in 2030 is no less than THB 40,000,000,000 and all relevant licences held by TTTBB are renewed and all approvals necessary for the extension of the lease term have been obtained.

The rental fee for such extended 10-year period will start at THB 433.21 per core kilometre per month (VAT excluded) and will be reviewed once a year on 1 January according to the consumer price index (CPI) published by the Ministry of Commerce; however, the fee will increase by no more than 3% (but no less than 0%) per annum each year.

3) Costs and expenses relating to the underground relocation of the existing optical fibre cables and rental fees for the underground sub-ducts, which TTTBB will absorb any amount in excess of the costs as agreed between the parties at the time of JASIF’s initial public offering in 2015.

Such amendments will result in longer revenue stream from contractual rental fee for JASIF’s existing infrastructure assets currently invested by JASIF, which will be beneficial and offer JASIF and its unitholders the opportunity to receive higher returns on investment. In addition, JASIF may also make certain additional amendments to other related agreements as well.