Regarding the Waiver of the Tender Offer for All ...ktis.listedcompany.com/misc/ShareholderMTG/agm2015/20150330-ktis... · TIS Thai Identity Sugar Factory Company Limited ... Thailand

Opinion of the Independent Financial Advisor

Regarding the Waiver of the Tender Offer for All Securities of the Company by the Approval of the Shareholders (White Wash)

Presented to

Shareholders of

Kaset Thai International Sugar Corporation Public Company Limited

By

AIRA Securities Public Company Limited

March 18, 2015

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Table of Content

1. General Characteristics of Related Securities and Securities Offered to the Waiver 3

2. General Information on the Waiver 7

3. General Information on the Company 9

4. IFA’s Opinion on White Wash Transaction 4.1 Opinion on Policy and Management Plan Proposed by the Waiver 19 4.1.1 Policy and Management Plan 4.1.2 Organization Restructuring 4.1.3 Financial Restructuring Plan 4.1.4 Disposition Plan of Major Assets of the Company’s Group 4.1.5 Dividend Payment Policy 4.1.6 Related Transaction 4.2 Total Voting Rights of the Waiver Obtained after the Securities Acquisition and Additional

Shares Acquisition in the Future without Tender Offer 21 4.3 Potential Impacts on KTIS and Shareholders 21

5. Reasonableness of the Offering Price of KTIS to the Waiver 5.1 Book Value Approach 23 5.2 Market Comparable Approach using P/E Approach

5.2.1 Price to Book Value Approach 24 5.2.2 Price to Earnings Ratio Approach 25

5.3 Market Value Approach 26 5.4 Discounted Cash Flow Approach 27 5.5 Opinion of the Share Valuation Method 33

6. Summary of Independent Financial Advisor’s Opinion on the White Wash 34

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Abbreviations

The Company, KTIS Kaset Thai International Sugar Corporation Public Company Limited TIS Thai Identity Sugar Factory Company Limited EPC Ekarat Pattana Company Limited EPPCO Environment Pulp & Paper Company Limited KTBP Kaset Thai Bio Power Company Limited PSP Permsinpattana Company Limited RPE Ruamphol Nakhon Sawan Industry Company Limited KTF Kaset Thai Bio Fertilizer Company Limited TEP Thai Ekaluck Power Company Limited SSK Sapsirikaset Company Limited RPBP Ruamphol Bio Power Company Limited LIS Lopburi International Sugar Company Limited LBE Lopburi Bioethanol Company Limited LBP Lopburi Biopower Company Limited Sumitomo Sumitomo Corporation Nissin Nissin Sugar Company Limited 3SH 3S Holding Company Limited HJH Hathai Jaroon Ek Holding Company Limited SEC Securities and Exchange Commission SET Stock Exchange of Thailand

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1. General Characteristics of Related Securities and Securities Offered to the Waiverer

1.1) Basis of the Request for a Waiver of Tender Offer With this issuance of the ordinary shares of the Company to the Waiverer, the Waiverer

wishes to restructure the Company’s shareholding structure after the listing on the Stock Exchange of

Thailand according to the Investment Agreement of the Company which was disclosed in the filing

and prospectus. The procedures are summarized below.

1) Prior to the listing on the Stock Exchange, Sumitomo Corporation (“Sumitomo”); Nissin Sugar Co., Ltd. (“Nissin”) and Mrs. Hathai Siriviriyakul executed the Investment Agreement agreeing that Sumitomo and Nissin jointly invest in the shares of the joint venture company, 3S Holding Co., Ltd. (“3SH”), up to an amount not exceeding Baht 2,650 million. Sumitomo and Nissin have no relationship with the Company and its shareholders, and both companies do not constitute a person acting in concert pursuant to the Notification of the Capital Market Supervisory Board No. TorChor. 7/2552, Re: Acting in concert as a result of the nature of a relationship or behavior and requirements under Sections 246 and 247.

2) Under the Investment Agreement, 3SH, a joint venture company held by Sumitomo, Nissin, and Mrs. Hathai Siriviriyakul, has proportionate shareholding as follows: a. 69.78 percent of the total issued shares of 3SH is held by Mrs. Hathai Siriviriyakul

through Hathai Jaroon Ake Holding Co., Ltd. (“HJH”) (99.99 percent of shares in HJH is held by Mrs. Hathai Siriviriyakul);

b. 25.18 percent of the total issued shares of 3SH is held by Sumitomo; and c. 5.04 percent of the total issued shares of 3SH is to be held by Nissin.

This joint venture partnership between Sumitomo, Nissin and Mrs. Hathai Siriviriyakul

through HJH can greatly help support the business of the Company in the future because

Sumitomo and Nissin have experience and expertise in sugar industry, which is one of their

core businesses.

3) Prior to the listing of the Company on the Stock Exchange of Thailand, 3SH had acquired shares of the Company from Mrs. Hathai Siriviriyakul in the amount of 291,600,000 shares, representing 8.90 percent of the total issued shares. Prior to the listing, the total number of issued shares of the Company was 3,274,573,000 shares or approximately 7.60 percent of the total issued shares after the listing. After the listing, the total number of issued and paid up shares of the Company was 3,860,000,000 shares.

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The shareholding structure of the Company before getting listed on the Stock Exchange of

Thailand is shown below.

1) 3SH is desirous to acquire the Company’s share of approximately 25.00 percent of the total issued shares (25.00 percent of the total votes of the Company) after the listing, by means of acquiring the remaining entire amount of shares of 17.40 percent from Mrs. Hathai Siriviriyakul in one occasion. However, the restriction concerning the share disposal of the shareholders is subject to the Notification of the Board of Governors of Stock Exchange of Thailand No. BorChor/Ror. 01-03, Re: Prohibiting Management on Shareholders and Related Persons from Selling Shares and Securities within a Specified Period, 2001 (the “Notification on Silent Period”) prohibits Mrs. Hathai Siriviriyakul from selling the entire amount of her 17.40 percent of shares on one occasion. 3SH, therefore, purchased the shares from Mrs. Hathai Siriviriyakul from time to time, provided that the shares which Mrs. Hathai Siriviriyakul sold to 3SH from time to time are under the proportion eligible to be sold under the silent period.

2) 3SH purchased the shares from Mrs. Hathai Siriviriyakul from time to time until now. 3SH currently holds the shares of the Company in the total amount of 964,999,999 shares, or equivalent to 24.99 percent of the total issued shares (24.99 percent of the total votes of the Company).

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The current shareholding structure of the Company is as follows.

To fulfill the Investment Agreement between Sumitomo, Nissin and Mrs. Haithai Siriviriyakul

(through HJH), and complete the shareholding restructure of the Company by having 3SH acquire the

shares of the Company with the total of approximately 25.00 percent of the paid up shares of the

Company (25.00 percent of the total voting rights of the Company) as the Company has disclosed in

the filing and prospectus, the Waiverer will acquire 10 more additional shares from current holding of

964,999,999 to 965,000,009, which would result in the Waiverer holding 25 percent of the number of

shares issued and paid as planned and thereby obliged to do the tender offer. Therefore, the Waiver

requests to waive the tender offer for all securities of the Company by the vote of General Meeting of

Shareholders (White Wash).

1.2) General characteristics of the Transaction

The resolution of the board of directors’ meeting No. 2/2015, held on March 6, 2015 approved and have resolution to submit to the shareholder meeting to issue new shares for 10 Baht, increasing from the current registered capital of 3,888,000,000 Baht to 3,888,000,010 Baht, by issuing 10 newly issued shares at the par value of 1 Baht per share, and offer to 3S Holdings Company Limited (3SH), a related party of the Company and major shareholder of the Company, at the price of 12.44 Baht, whereby the offering price must not be less than 90 percent of the market

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price, which is the weighted average price of the shares traded 15 consecutive business days prior to the board of directors’ resolution on submitting the agenda to the General Meeting of Shareholder for the year 2015 for the approval of issuance of additional shares (February 12 to March 5, 2015), which is equal to 10.90 Baht. The approval of this increase in capital is considered a related transaction due to the allocation of 10 ordinary shares with par value of 1 Baht per share to 3SH, which is a major shareholder of the Company (holding 24.99 percent of the paid-up shares). This transaction is considered as a connected transaction of the Company as per Notification of the Capital Market Supervisory Board No. ThorJor. 21/2551 Re: Rules for the Connected Transactions, which refers to the Notification of the Board of Governors of the Stock Exchange of Thailand Re: Disclosure of information and other acts of listed companies concerning the Connected Transaction B.E.2546. under assets and service related, the size of the transaction has calculated into 0.00000015 percent, which is less than 0.3 percent of the net tangible value of the Company, by using the calculation method as follows.

Amount of Capital Increase = (124.4 * 100) = 0.00000015 % Intangible Assets 8,338,114,676 The size of this transaction is considered small, at the size of 0.00000015%; the Company

has no duty to disclose the transaction under Related Party transaction and is not required to file a report on the transaction to the Stock Exchange of Thailand.

This acquisition will result in the stake of 3SH increasing from its holding of 964,999,999

shares, representing 24.99 percent, to 965,000,009 shares, representing 25.00 percent of the total

paid up shares of the Company. After the Waiverer’s purchase of the ordinary shares, the Waiverer

will hold 25.00 percent of the total issued and paid-up capital of the Company, and is required to

make a tender offer to purchase securities of the Company as defined in the Securities and

Exchange Act of B.E.2535 (as amended), along with the Notification of the Capital Market

Supervisory Board No. ThorJor. 12/2554 RE: Rules, Conditions and Procedures for the Acquisition of

Securities for Business Takeovers. Therefore, the Waiverer intends to waive the tender offer of the

Company by a resolution of the General Meeting of Shareholders (White Wash) according to the

Notification of the Office of the Securities and Exchange Commission No. SorChor. 36/2546 Re: Rules

for the Application for a Waiver from the Requirement to Make a Tender Offer for All Securities of the

Business, which the Annual General Meeting 1/2015 will be held on April 23, 2015 to approve the

request for a waiver for the tender offer of the Company.

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2. General Information of the Waiverer

2.1 Name of the Waiverer

3S Holding Company Limited

2.2 Address

Ekphol Building, 24 Wiphavadee-Rangsit Rd., Dingaeng, Dindaeng, 10400 Bangkok.

2.3 Business Overview

The Waiver, 3S Holdings Company Limited was established on August 14, 2013, doing

investment business as a holding company. Currently invested in KTIS only. The Waiverer was

established as a joint venture between Thai Investor which is the major shareholder of KTIS, Hathai

Jaroon Ek Holding Company Limited, and Japanese Investors who are business alliances, Sumitomo

Corporation and Nissin Sugar Company Limited, both of which are not related persons of the

Company and the shareholders of the Company.

2.4 Registered capital

Registered capital of the waiverer as of March 5, 2015 totals 965,408,200 Baht, comprises of 9,654,082 shares at the value of 100 baht per share.

2.5 List of top 10 shareholders of the Waiverer

Shareholder list of the Waiverer consists of 5 shareholders as at March 5, 2015

Rank Name Share Holding Percentage 1 Hathai Jaroon Ek Holding Company Limited1 6,736,673 69.78% 2 Sumitomo Corporation2 2,431,173 25.18% 3 Nissin Sugar Company Limited3 486,234 5.04% 4 Mr. Parphan Siriviriyakul 1 0.00% 5 Miss Siraarpa Siriviriyakul 1 0.00%

Total 9,654,082 100.00% Remarks: 1. Hathai Jaroon Ek Holding Company Limited established on April 5, 2013, with the registered

capital of 205,000,000 baht consisting of 2,050,000 shares with a par value of 100 baht per

share, acting as a holding company and owned by Mrs. Hathai Siriviriyakul for 100 percent.

2. Sumitomo Corporation is a listed company on the Stock Exchange of Japan and is a large

trading company with the paid-up capital of 219 million yen. The major shareholders are

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Sumitomo Life Insurance, Mitsui Sumitomo Life Insurance, Liberty Programming Japan, financial

institution and retail investors (as at 30 September 2014).

3. Nissin Sugar Company Limited is a publicly listed company in Japan, with a paid-up capital

of 7 billion yen. Nissin Sugar Company Limited’s major shareholders are Sumitomo Mitsui

Banking Corporation, Sumitomo Mitsui Trust Bank, institutional funds and retail investors.

2.6 Board of Directors

The Board of Directors of the Waiverer as at March 5, 2015

Name Position 1. Mr. Parphan Siriviriyakul Director 2. Mr. Prasert Siriviriyakul Director 3. Mr. Nathapun Siriviriyakul Director 4. Mrs. Darat Vibhatakalasa Director 5. Mr. Hiroyuki Maeda Director 6. Mr. Masaya Harajima Director

2.7 Financial Position and Operating Results of 3S Holding Company Limited (Million Baht) December 31, 2013

Total assets 291.68 - Investments in associates* 291.60 Total liabilities 0.40 Shareholder’s equity 291.28 Total revenue - Net profit (0.32)

Remark: * Invested only in KTIS, and the financial statement of 2014 is being prepared and audited by the auditor.

2.8 Information on the Shareholders of the Waiverer

General Information of Sumitomo Corporation

Company name Sumitomo Corporation

Registration date December 24, 1919 Status Company registered in Japan Paid-up capital 219,300 million yen Total assets (March 31, 2014) 8,666,738 million yen Total revenue (Full year, March 31, 2014) 3,317,406 million yen Net profit (Full year, March 31, 2014) 233,858 million yen Nature of business - Steel business

- Transportation and Construction

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- Public Utility and Environment - Energy, Mineral, Chemical and Electronics - Media and Lifestyle products - Investment in other businesses

Subsidiaries under the consolidated financial statement

606 Companies (118 Domestics and 488 Internationals)

Associates 254 Companies (54 Domestics and 200 Internationals)

General Information of Nissin Sugar

Company name Nissin Sugar Co., Ltd.

Registration date October 3, 2011 Status Company registered in Japan Paid-up capital 7,000 million yen Total assets (March 31, 2014) 56,880 million yen Total revenue (Full year, March 31, 2014) 51,878 million yen Net profit (Full year, March 31, 2014) 1,931 million yen Nature of business Sugar production and distribution at 2 sugar manufacturing plants (Chiba

and Osaka), with the production capacity of 200,000 tons, which is the second largest sugar manufacturer in Japan distributing sugar to industrial and retail customers.

2.9 Relationship between the Waiverer and the Company

The Waiverer is related to the Company, Executives, Controlling Shareholders and major

shareholders of the Company as follows.

1) 3SH shareholding in the Company accounted for 24.99 percent of the paid-up shares

(24.99 percent of the voting rights of the Company).

2) 3SH’s major shareholder is Mrs. Hathai Siriviriyakul through HJH, which is holding 69.78

percent of the total paid-up shares of 3SH.

3) Hathai Jaroon Ek Holding Company Limited (HJH), which is the major shareholder in

3SH, is held by Mrs. Hathai Siriviriyakul, holding 99.99 percent of the paid-up shares of

HJH.

4) Mrs. Hathai Siriviriyakul, a major shareholder of the Company, holding 36.19 percent of

the total paid-up shares of the Company, and is considered a person under Section 258

of the Waiverer.

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3SH do not enter into any transaction with the Company, Executives, Controlling

Shareholders, and Major Shareholders of the Company.

3. General Information of the Company

3.1 General Information The Company : Kaset Thai International Sugar Corporation Public Company Limited Address : 1/1 Moo 14 Nong Pho, Ta Khli, Nakorn Sawan Office Location : Ekphol Building, 24 Wiphavadee-Rangsit Rd., Dingaeng, Dindaeng,

10400 Bangkok

Registered Capital : 3,888,000,000 Shares Paid-up Capital : 3,860,000,000 Shares Par Value : 1 Baht

3.2 Business Overview

Kaset Thai International Sugar Corporation Public Company Limited (“The Company”),

formerly known as Kaset Thai Industrial Sugar and/or Thai Ekaluck Group founded by Mr. Jaroon and

Mrs. Hathai Siriviriyakul, an experienced sugar manufacturer of over 49 years of experience.

Currently, the Company is a manufacturer and distributor of sugar in a comprehensive industry, with

supplementary production from the sugar production such as Ethanol, paper pulp, biomass power

plant. The Company’s business can be divided into two categories as stated below.

(1) Manufacturing and Distribution of Sugar The Company produces and distributes sugar to customers both domestic and abroad, which can be categorized into three products which are raw sugar, white sugar and refined sugar.

(2) Supplementary Businesses, which are: (a) Production and distribution of paper pulp from bagasse, bleached paper

pulp from bagasse, which can be categorized into wet and dry paper pulp.

(b) Production and distribution of ethanol, a byproduct from using a raw material from molasses. Currently, EPC has a licence to produce ethanol for up to three grades, including potable alcohol, industrial alcohol, and fuel alcohol. In any case, EPC currently produces and distributes 2 grades of ethanol which are industrial alcohol and fuel alcohol.

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(c) Production and distribution of electricity by using bagasse, a byproduct from the production of sugar as a raw material.

As of December 31, 2014, the Company has the following subsidiaries.

Subsidiaries Abbreviation Business Holding

Percentage Thai Identity Sugar Factory Company Limited

TIS Production and distribution of sugar, both domestic and abroad.

100%

Ekarat Pattana Company Limited EPC Production and distribution of ethanol from molasses, both domestic and abroad.

74% direct holding and 26% through PSP

Environmentpulp & Paper Company Limited

EPPCO Production and distribution of bleached paper pulp from bagasse, both domestic and abroad.

100%

Kaset Thai Bio Power Company Limited

KTBP Production of Electricity 100%

Ruamphol Nakhon Sawan Industry Company Limited*

RPE Production and distribution of sugar, both domestic and abroad.

Landlord of the Sugar Factory rented by KTIS

Permsinpattana Company Limited PSP Holding company (currently holding 26% of EPPCO)

100%

Sapsirikaset Company Limited SSK Acquisition of land to support the expansion of the Company’s group

100%

Kaset Thai Bio Fertilizer Company Limited

KTF Currently under development for soil enhancement products.

100% through EPC

Thai Ekaluck Power Company Limited

TEP Currently under construction for 50 MW power plant.

100%

Ruamphol Bio Power Company Limited

RPBP Currently under construction for 50 MW power plant.

100%

Lopburi International Sugar Company Limited

LIS - Not operating yet - 100% through PSP

Lopburi Bioethanol Company Limited

LBE - Not operating yet - 100% through PSP

Lopburi Biopower Company LBP - Not operating yet - 100% through

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Limited PSP *No direct holding

The Revenue Structure of the Group for the years 2012-2014

Unit: Baht Million Business Operated by 2012 % 2013 % 2014 %

Production and distribution of sugar and molasses

TIS 27,174 90.4% 17,928 84.9% 17,174 81.5%

Production and distribution of pulp and paper

EPPCO 1,674 5.6% 1,496 7.1% 1,598 7.6%

Production and distribution of alcohol

EPC 1,210 4.0% 1,554 7.4% 1,750 8.3%

Production and distribution of electricity

KTBP 0 0.0% 151 0.7% 553 2.6%

Total 30,058 100.0% 21,129 100.0% 21,075 100.0% 3.3 Shareholding Structure

Top 10 shareholders listing of the Company as at May 29, 2014

Rank Name Shareholding Percentage (%) 1 Mrs. Hathai Siriviriyakul* 1,652,995,200 42.82 2

3S Holding Company Limited * 708,964,800 18.37 3 Mr. Siripak Siriviriyakul 190,000,000 4.92 4 MAYBANK KIM ENG SECURITIES PTE. LTD. 128,000,000 3.32 5

Mr. Siripat Siriviriyakul 120,892,900 3.13 6 THE BANK OF NEW YORK (NOMINEES) LIMITED 97,800,000 2.53 7 KING WAN CORPORATION LIMITED 87,267,000 2.26 8

Mr. Phumilerk Wangpridalertkul 72,345,300 1.87 9 Mr. Prin Siriviriyakul 70,832,000 1.84

10 Miss Saisiri Siriviriyakul 65,000,000 1.68 Total 3,194,097,200 82.74

Source: The Stock Exchange of Thailand Remark: On March 2, 2015, Mrs. Hathai Siriviriyakul transferred her shares to 3S Holdings Company

Limited for the amount of 256,035,199 shares, resulting in Mrs. Hathai holding the remaining

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1,396,960,001 shares, accounting for 36.19 per cent and 3S Holdings Company Limited holding 964,999,999 shares accounting for 24.99 per cent.

3.4 Board of Directors Members of the Board of Directors as of December 30, 2014, consisted of 15 directors.

Rank Director List Position 1 Mr. Pricha Attavipach Chairman 2 Mr. Sirivuthi Siamphakdee Vice Chairman 3 Mr. Praphan Siriviriyakul Director 4 Mr. Nathapun Siriviriyakul Director 5 Mrs. Darat Vibhatakalasa Director 6 Mr. Prasert Siriviriyakul Director 7 Miss Siraarpa Siriviriyakul Director 8 Mr. Apichart Noochprayoon Director 9 Miss Chua Eng Eng Director

10 Mr. Shunsuke Tsujiyama Director

11 Mr. Krairit Nilkuha Independent Director / Chairman of the Audit Committee

12 Mr. Sathaporn Kotheeranurak Independent Director / Audit Committee 13 Acting Sublt. Theerayut Changpetch Independent Director / Audit Committee 14 Mr. Isgan Kraiwit Independent Director 15 Mr. Phoonsak Boonsalee Independent Director

3.5 Financial Position and Operating Results

Statements of Financial Position Pro-forma Consolidated Consolidated Consolidated

(Unit : Million Baht) 2012 % 2013 % 2014 % Current assets Cash and cash equivalents 1,921.80 11.6 416.3 2.5 828.10 4.4

Short-term investment 0.9 0.0 0.9 0.0 1.00 0.0

Trade and other receivables, net 818.2 4.9 1043.3 6.4 1,446.30 7.7

Farmer receivables, net 1,073.10 6.4 580.5 3.5 519.20 2.7

Receivables from related parties 151 0.9 0.0 0.0

Inventories, net 3,579.30 21.6 4,561.60 28.2 4,845.70 25.9

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Short-term borrowing to others 161.5 0.9 - 0.0 - 0.0

Short-term borrowing to related parties - 0.0 - 0.0 - 0.0

Other current assets 703.6 4.2 102.2 0.6 126.40 0.6

Total Current Assets 8,409.40 50.8 6,704.80 41.2 7,766.70 41.5

Non-Current Assets 0.0

Investments in associates cost – Net - 0.0 - 0.0 0.0

Deposit as collateral 0.6 0.0 - 0.0 0.0

General Investments 0.4 0.0 0.4 0.0 0.40 0.0

Long-term loans to related companies - 0.0 - 0.0 0.0

Investment property, net - 0.0 269.9 1.6 304.20 1.6

Property, plant and equipment, net 7,514.50 45.4 8,800.00 54.5 10,063.90 53.8

Intangible assets, net 6.5 0.0 11.7 0.0 234.30 1.2

Deferred tax assets, net - 0.0 192.5 1.1 202.60 1.0

Other non-current assets 618.1 3.7 151 0.9 117.80 0.6

Total Non-Current Assets 8,140.10 49.1 9,425.50 58.4 10,923.20 58.4

Total Assets 16,549.50 100.0 16,130.30 100.0 18,689.90 100.0

Statement of Financial Position Pro-forma Consolidated Consolidated Consolidated (Unit : Million Baht) 2012 % 2013 % 2014 %

Liabilities

Current liabilities

Account Payable and Trust Receipt 336.3 2.0 - 0.0 - 0.0

Trade and other payables 3,779.50 22.8 3,605.90 22.3 3,032.90 16.2

Short-term borrowings from financial institutions

789.7 4.7 1,469.20 9.1 2550.7 13.6

Short-term borrowings from related parties

594.77 3.5 968.3 6.0 682 3.6

Current portion of long-term borrowings 1,130.90 6.8 1,317.20 8.1 783.00 4.1

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Other payables 260.7 1.5 - 0.0 - 0.0

Payables to the related parties 24.1 0.1 - 0.0 - 0.0

Income tax payable 395.8 2.3 68.2 0.4 48.9 0.2

Obligation – share to be issued 2,082.30 12.5 2,082.30 12.9 - 0.0

Other current liabilities 447.1 2.7 94 0.5 84.1 0.4

Total Current Liabilities 9,841.17 58.90 9,605.10 59.30 7,181.60 38.4

Statements of Financial Position Pro-forma Consolidated Consolidated Consolidated (Unit : Million Baht) 2012 % 2013 % 2014 %

Non-Current Liabilities

Long-term borrowings 2,877.50 17.3 3,007.30 18.6 1,999.00 10.6

Financial lease liabilities 812.3 4.9 - 0.0 - 0.0

Employee benefit obligations 232.6 1.4 260.5 1.6 299.2 1.6

Long-term provision for decommissioning costs

0 0.0 9.6 0.0 10 0.0

Other non-current liabilities 713.4 4.3 657.4 4.0 627.6 3.3

Total Non-Current Liabilities 4,635.80 27.9 3,934.80 24.2 2,935.80 15.7

Total Liabilities 14,476.97 86.8 13,539.90 83.5 10,117.40 54.1

Shareholders’ Equity

Issued and paid-up share capital 3,274.60 19.7 3,274.60 20.3 3,860.00 20.6

Premium on share capital - - 0.0 5,203.00 27.8

Capital reserve for share-based payment transactions

- - 0.0 4.00 0.0

Discount on business combination under common control

(3,738.70)

(22.5)

(3,577.20)

(22.1)

(3,577.00)

(19.1)

Retained Earnings

Appropriated- Legal reserve 16.50 0.0 55.30 0.3 213.00 1.1

Unappropriated 2,520.13 15.2 2,837.70 17.5 2,869.50 15.3

Total Shareholders’ Equity 2,072.53 12.5 2,590.40 16.00 8,572.50 45.8

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Total Liabilities and Shareholders’ Equities

16,549.50 100.0 16,130.30 100.00 18,689.90 100.0

Statement of Comprehensive Income Pro-forma Consolidated Consolidated Consolidated (Unit : Million Baht) 2012 % 2013 % 2014 %

Revenues from sales and services Cost of sales and services

24,630.70 (17,794.20)

100.0 (72.2)

18,051.70 (13,824.70)

100.0 (76.6)

20,120.14 (14,902.45)

100.0 (74.1)

Gross Profit 6,836.50 27.8 4,227.00 23.4 5,217.69 25.9 Other income 469.80 1.9 786.92 4.4 76.19 0.4

Earning Before Expenses 7,306.30 29.7 5,013.92 27.8 5,293.88 26.3

Selling expenses (2,483.60) (10.1) (2,038.40) (11.3) (1,929.70) (9.6) Administrative expenses (1,085.20) (4.4) (1,054.47) (5.8) (1,489.54) (7.4)

Total Expenses (3,568.80) (14.5) -3,092.87 (17.1) (3,419.24) (17.0)

Earnings before interest and tax 3,737.50 15.2 1,921.05 10.6 1,874.64 9.3 Financial costs (485.10) (2.0) (495.86) (2.7) (415.31) (2.1)

Profit Before Corporate Income Tax 3,252.40 13.2 1,425.19 7.9 1,459.33 7.3 Corporate income tax expense (746.20) (3.0) (206.71) (1.1) (93.59) (0.5)

Profit for the Year 2,506.20 10.2 1,218.48 6.7 1,365.74 6.8

Financial Ratios 2012 2013 2014

Gross profit margin (%) 27.8 23.4 25.9

Net profit margin (%) 10.2 6.7 6.8

Debt to equity ratio (times) 7.0 5.2 1.1

Statements of Cash Flows Pro-forma Consolidated Consolidated Consolidated (Unit : Million Baht) 2012 2013 2014

Net cash generated from (used in) operating activities 2,680.70 1,022.00 936.00

Net cash used in investing activities 1,790.50 (1,919.66) (2,286.04)

Net cash generated from financing activities (2,992.40) 156.67 1,761.99 Net Increase (Decrease) in Cash and Cash Equivalents 1,478.80 (741.04) 411.76

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Cash and cash equivalents at the beginning of the year 50.10 1,157.34 416.31

Cash and cash equivalents at the end of the year 1,921.80 416.31 828.07 Summary of Financial Performance

Assets

Total assets of the Company as of the end of the year 2014 was 18,689.90 million baht, representing

a 2,559.60 million baht increased compared to the year 2013, or 15.9 percent increased in assets.

The increase consisted mainly of accounts receivable and farmers’ receivable increasing by 341.70

million baht, 21.00 percent increase from the year 2013. The property, plant, and equipment also

increased by 1,264.90 million baht, an increase of 14.4 percent from the additional investment to

expand sugar and power plant business.

Liabilities

Total liabilities of the Company was 10,117.40 million baht at the end of 2014, a decrease of 3,422.50

million baht, 25.3 percent lower than the year 2013. The decrease consisted mainly of the reduction

of trades and other payables of 573 million baht, 15.9 percent lower than the year 2013. Loans from

financial institution were also lowered by 747.30 million baht, 11.0 percent lower than the year 2013,

due to repayment from the capital raised from the initial public offering.

Shareholder’s Equity

Shareholder’s equity at the end of the year 2014 amounted to 8,572.50 million baht, 5,982.10 baht

increase from the year 2013, accounted for 230.9 percent increase in shareholder’s equity, derived

mainly from the money received from the initial public offering of 5,854 million baht with a share

premium of 5,203 million baht.

Revenue

In 2013, the revenue was 18,051.70 million baht, 6,579 million baht decreased from the year 2012,

accounted for 26.7 percent decrease due to the reduction in its main sugar business. Raw sugar

sales dropped as the product was processed into refined sugar for better pricing, which was

subsequently sold in 2014. The revenue in the year 2014 was 20,120.14 million baht, increased by

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2,068.44 million baht from the year 2013, accounting for 11.5 percent increase due to the sugar

business, whereby the Company is able to sell more sugar. Furthermore, the paper pulp, ethanol,

and power plant business also did better in the year 2014.

Cost of Sales and expenses

Cost of sales and services in 2013 was 13,824.70 million baht, 3,969.50 million baht reduction from

the year 2012, accounting for 22.3 percent reduction caused by the decline in revenues from sales

and services. In the year 2014, the cost of sales and services was 14,902.45 million baht, 1,077.75

million baht decrease from the year 2013, accounting for 7.8 percent increase as revenue from sales

and services increased. In any case, the cost to income ratio of the year 2014, the ratio improved

from 76.6 percent in 2013 to 74.1 percent in 2014.

Selling and Administrative Expenses

Selling and administrative expenses in 2013 was 3,092.87 million baht, 475.93 million baht lower than

the year 2012, accounting for 13.3 percent reduction due to the reduction in the contributions to the

Office of the Cane and Sugar Fund, transportation cost and reduction of export expenses. In the

year 2014, selling and administrative expenses was at 3,419.24 million baht, 326.37 million baht

increase from the year 2013, accounting for 10.6 percent increase, due to the increase in

transportation and export cost in tandem with the higher sales of sugar.

Net Profit

In the year 2013, the Company reported a net profit of 1,218.48 million baht, 1,287.72 million baht

lower than the year 2012, accounted for 51.4 percent reduction. In the year 2014, the Company had

a net profit of 1,365.74 million baht, increased by 147.26 million baht compared to the year 2013,

accounted for 12 percent increase.

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4. Opinion of the Independent Financial Advisor regarding the Application for waiver of tender offer for all securities of the Company.

4.1 Opinion on the Policy and Business Plan proposed by the Waiverer 4.1.1 Policy and Plan on Business Administration

After an acquisition of the newly issued ordinary shares of the Company, the Waiverer requests to waive the tender offer for all securities of the Company, which will resulted in the Waiverer holding 25% of total paid-up shares of the Company. The Waiverer has no plan or policy to materially change the objectives of business operation of KTIS group in the next 12 months, including the management of KTIS group which will still adhere to the current business plan.

The IFA is of the opinion that the policies and plans for the management of the KTIS Group after the Waiverer obtained the waiver of the tender offer is according to the terms of joint venture and shareholding restructure plan agreed upon before the listing the Company in the stock exchange. Prior to the request to waive the tender offer, the Waiverer is already a major shareholder holding 24.99 percent of the total paid-up shares and the Waiverer is involved in the administration and approval of the policies and business plan of the Company’s group. Therefore, this waiver request will serve to continue to maintain the current operation and strengthen the business, whereby the Waiverer is in joint venture with business alliances from Japan. Both alliances have experience as a leading trading company and sugar producer and they will help support the competitiveness and expand the international business base.

4.1.2 Organization Restructuring

Currently, the Waiverer which is a joint venture between Mrs. Hathai Siriviriyakul, Sumitomo, Nissin, with the appointment of one representative director, Mr. Shunsuke Tsujiyama. After the Waiverer has acquired the shares and a waiver of the tender offer of the Company is approved, the Waiverer will not appoint additional representative director, and no further changes to the structure of the Board of Directors, even though the Waiverer’s shareholding in the Company will increase significantly as a proportion of shares equal to 25 percent of the total paid-up shares of the Company. The Waiverer will not appoint additional representative director to the Company in any case. The policy and management will still be administered by the existing Board of Directors and Executive Committee without any change in the structure of the Board of Directors. The IFA is of the opinion that the Company will continue to implement the current policies and operations. If

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there is any change in the organization thereafter, it will be done to achieve higher competence in the management.

4.1.3 Financial Restructuring Plan

The Waiverer does not have any significant financial restructuring plan for the Company within the next 12 months. The IFA is of the opinion that the Company’s financial structure, with a debt to equity ratio of 1.2 times and the shareholders’ equity of 8,572 million baht as at December 31, 2014, is adequate for the operation and can accommodate further expansion in the future. After the Waiverer successfully receive the approval for a waiver of tender offer, if there is a need to invest or expand which requires the financial restructuring by the increase of capital or loan, the Waiverer shall consider this matter together with the Board of Directors and Executive Officers of the Company on the financial structure suitable for the future business operation.

4.1.4 Disposition Plan of Major Assets of the Company and its Subsidiaries

The Waiverer has no policy to sell any major assets of the Company and its subsidiaries over the next 12 months. IFA views that it is possible that the Waiverer will not sell any major assets of the Company and its subsidiaries since the Waiverer intends to operate the business in accordance with the current business plan. The major assets of the Company and its subsidiaries are necessary for the existing business operation. Therefore, the IFA is of the opinion that the business will continue unaffected according to the Waiverer’s plan.

4.1.5 Dividend Payment Policy The Waiverer has no policy to significantly change the dividend payment policy of

the Company and its subsidiaries within the next 12 months, and any action will be considered together with the Board of Directors. The Company’s dividend payment policy is to pay dividends to its shareholder at not less than 50% of net profit based on the Company’s financial statement after the deduction of any reserve requirement by the Company’s regulation and the law and If there are no other necessities or no restrictions by the loan agreement. The dividend payment will not significantly affect the normal business of the Company. IFA is of the opinion that the business will not be affected on this matter.

4.1.6 Related Party Transaction

On the date of waiver application filing, the Waiverer or person of the section 258 of the Waiverer has no related transaction with the Company. In the future, should there be

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any such related party transaction after the Waiverer has become a shareholder of the Company, the Company and the Waiverer will conduct in accordance with the normal practice of the business operation and commercial terms for the benefit of the Company. In any case, such transactions must be approved by the Board of Directors meeting and/or the shareholders meeting. The transaction must be approved by the General Meeting of Shareholders, which the Waiverer will not be able to vote in favor of entering into the related transactions in accordance with the rules and regulations as required by law under the notification of capital market board of SEC and notification of SET as well the good corporate governance and Audit Committee’s opinion on the appropriateness of the transaction.

4.2 Total Voting Rights of the Applicant obtained after this Securities Acquisition and in the

Future where additional Shares Acquisition can be done without Tender Offer. In the case the Shareholders’ Annual General Meeting No. 1/2015, which will be held on April 23, 2015, approves KTIS to issue and offer new shares to the Waiverer for 10 shares, the Waiverer will end up holding 965,000,009 shares or equivalent to 25.00 percent of the Company’s paid-up capital, after including 964,999,999 shares that the Waiverer currently holds. Thereafter, the Waiverer can acquire additional shares up to the maximum amount of 964,999,996 shares or equivalent to 24.99 percent of the Company’s total paid-up capital without having to make a tender offer unless the total shareholding of the Waiverer crosses the 50 percent point of the Company’s total paid-up capital.

In any case, the IFA had further inquired on the intention on share acquisition policy after this waiver of tender offer is approved and was informed that the Waiverer plans to acquire more shares from Mrs. Hathai Siriviriyakul for 7,000,001 shares according to the shareholder restructuring plan that have already been agreed upon. This will result in the Waiverer eventually holding a total of 972,000,010 shares, representing 25.18 percent of the paid-up shares of the Company.

4.3 Potential Impacts and Benefits on Shareholders and the Company

4.3.1 Risk on the Waiverer’s Right to Reject Resolutions in the Shareholders’ Meeting.

After the Company has approved the issuance of newly issued shares and the Waiverer received a waiver from making a tender offer for all outstanding shares of the Company, the Waiverer will increase the shareholding of the Company from 24.99 percent to 25.00 percent of the total paid-up shares of the Company with

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equivalent voting rights. The Waiverer will hold 25.00 percent of the paid-up capital, allowing the Waiverer to exercise the right to reject any resolutions in the shareholders’ meeting which requires the approval of not less than 3 out of 4 of the shares amount of the shareholders present at the meeting and entitled to vote, such as, capital increase; capital reduction; memorandum amendment; acquisition and disposition of assets; related transaction and mergers and acquisitions.

4.3.2 No Impact on Control Dilution and Earnings Dilution on the Current Shareholders

In the event that the General Meeting of Shareholders for the year 2015 held on April 23 approves the issuance and offering the newly issued shares to 3SH by 10 shares with par value of 1 baht per share, there will be no impact on control dilution and earnings dilution due to the amount of shares issued to the Waiverer does not significantly change the voting rights and profit sharing of the shareholders.

4.3.3 No Impact on Price Dilution

The offer issuance price of the shares is 12.44 baht per share, which is not less than 90 percent of the “Market Price”. The “Market Price” is defined as the weighted average price of the Company’s shares traded on the Stock Exchange of Thailand for fifteen consecutive business days prior to the Board of Directors resolution to propose the agenda to the Annual General Meeting of Shareholders for the year 2015 to approve the offering of the new shares, which is 10.90 baht calculated from February 12, 2015 to March, 5 2015. Thus, the transaction does not cause any impact on the share price or price dilution effect.

4.3.4 Can Continue to Operate Without any Changes in the Policy or Management Administration.

After the Waiverer has been permitted to waive the tender offer to the Company’s shares, there is a significant change in shareholding structure for veto rights for the Waiverer. However, the Waiverer has no plan or policy to change the business operation, reorganization and administration, including no plans to sell major assets or change the dividend policy of the Company. The Company will maintain the existing management without any impact on the Company and shareholders.

4.3.5 Enhance Business Competitiveness

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The shareholding change resulting in the Waiverer increasing its shareholding will allow alliances, Sumitomo and Nissin, (already shareholders of the Waiverer) to support the Company’s business plan as agreed. The Company will receive new technology in manufacturing and distributing its core product and businesses from Nissin, the leading sugar manufacturer and distributor in Japan. This will allow the Company to value add to their products and generate higher return from a more efficient cost control, as well as expanding the international customer base with Sumitomo’s global distribution network. This will enhance business competitiveness and generate higher return in the future for shareholders of the Company.

5. Appropriateness in the Share Price of the Newly Issued Share Offering to the Waiverer In determining the appropriateness of the price of the newly issued ordinary shares, the IFA has evaluated the share price of KTIS and its subsidiaries using four different valuation methods which are: 1) Book Value Approach 2) Market Comparable Approach (by using Price to Book Value approach and Price to

Earnings approach๗ 3) Market Value Approach 4) Discounted Cash Flow Approach Whereby the 4 methods of share price calculation of KTIS and subsidiaries are explained as follows: 5.1 Book Value Approach

The valuation method is to reflect the value of the Company, as appearing in the accounts at that time. In this case, as measured by the shareholders’ equity of the Company (excluding the stakeholders who have no control over the subsidiaries) shown in the consolidated financial statement of the Company as at December 31, 2014, which have been reviewed by the auditors of the Company. The information on the financial statement is used to calculate the aggregate book value of the Company as follows.

(Unit: million baht) Issued and paid-up capital 3,860.00

Plus Share premium 5,202.88

Plus Capital reserve for share-based payment 3.71

Plus Retained earnings 3,082.99

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Minus Discount on business combination 3,577.17

Total shareholders’ equity of the Company 8,572.41

Amount of issued and paid-up shares (million shares) 3,860.00

Book value per share (Baht) 2.22

Source: Audited Financial Statement for the year 2014, as of December 31, 2014, audited by Mr. Prasit

Yuengsrikul, C.P.A. No. 4174, PricewaterhouseCoopers ABAS Co., Ltd.

Remark: Book value as at December, 31 2014 already reflected the financial position and operating results

of the Company. Therefore, there is no need for further adjustment.

The valuation of the Company is 2.22 baht per share under the book value approach.

5.2 Market Comparable Approach 5.2.1 Price to Book Value Approach

This valuation method is based on the closing price to book value (P/BV) by using

the average P/BV of the past (3 months, 6 months, 9 months, and 210 business

days) to the date of March 5, 2015, the last business day before the Board of

Directors of the Company approved a waiver from doing a tender offer by a

resolution to the shareholders of the Company. The average P/BV of the listed

companies in sugar industry is referred below.

Name Symbol Khon Kaen Sugar Industry Public Company Limited KSL Khonburi Sugar Public Company Limited KBS

This valuation method is determined by taking the net book value of the Company

as of December 31, 2014 multiplied by the average closing price to the average

book value (P/BV) of the peer companies, summarized as follows.

Period KTIS KSL KBS Mean Valuated Price (Baht/Share)

Past 3 months 5.06 1.63 1.42 1.52 3.37 Past 6 months 5.13 1.69 1.56 1.63 3.62 Past 9 months 5.16 1.76 1.61 1.69 3.75

Past 210 business days* 5.16 1.78 1.61 1.70 3.77

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Source: SETSMART Remark * The past 210 business days average use the data back to the first day trade of KTIS which was April 28,

2014.

According to the valuation by using the book value of the Company as at

December 31, 2014 at 2.22 baht per share, multiply by the average of the peer

companies as a reference, the share value will be between 3.37 - 3.77 baht per

share. Therefore, this valuation method values the price of the Company’s share at

between 3.37 – 3.77 baht per share.

5.2.2 Price to Earnings Ratio Approach This valuation approach is based on the ratio of price to earnings per share (P/E) of

the average P/E of the listed companies on the previous periods (past 3 months, 6

months, 9 months, and 210 business days) to March 5, 2015, the last business day

before the Board of Directors approved a waiver of tender offer for all of the

Company’s shares by a resolution to the shareholders of the Company. The

average P/E of the listed companies on the Stock Exchange of Thailand under the

sugar industry will be used as references below.

Name Symbol Khon Kaen Sugar Industry Public Company Limited KSL Khonburi Sugar Public Company Limited KBS

This valuation method is determined by using the companies’ earnings per share for the last 4 quarters, multiplied by the P/E ratio of the peer companies, which is summarized as follows:

Source: SETSMART Remark * The past 210 business days average use the data back to the first day trade of KTIS, which was April

28, 2014.

Period KTIS KSL KBS Mean Valuated Price (Baht/Share)

Past 3 months 26.98 13.02 27.03 20.03 7.41 Past 6 months 27.35 13.71 23.84 18.78 6.95 Past 9 months 27.91 13.52 20.77 17.14 6.34

Past 210 business days* 28.02 13.52 19.71 16.61 6.15

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According to the valuation by using the net profit of the Company as at December

31, 2014 at 0.37 baht per share, multiplied by the average of the peer companies

as a reference, the share value will be between 6.15 – 7.41 baht per share.

Therefore, this valuation method reflects the price of the Company’s share at

between 6.15 – 7.41 baht per share.

5.3 Market Value Approach This approach is calculated based on the comparison of the weighted average historical

share price of KTIS and subsidiaries traded in SET over a period of 3 months, 6 months, 9

months and 210 business days, which is the period prior to the date of the price fixing date.

This valuation method will be assessed by the IFA using data up to March 5, 2015, the last

business day prior to the Board of Directors approving a waiver of tender offer for all of the

Company’s shares by a resolution to the shareholders of the Company. Therefore, the

market value of the shares will be calculated as follows.

Period of Time Average Daily Volume Weighted Average Market

Volume (Shares) Value (Baht) Price (Baht / Share)

Past 3 months 3,889,327 44,416,815 11.42 Past 6 months 5,163,912 59,483,410 11.52 Past 9 months 7,072,857 80,344,767 11.36

Past 210 business days* 8,544,243 93,324,770 10.92 Source: SETSMART Remark * The past 210 business days average uses the data back to the first day trade of KTIS which was April

28, 2014.

According to the table above, by using the market value of the weighted average market

price over the past 3 months, 6 months, 9 months, and 210 business days prior to the price

fixing date, the share value will be between 10.92 – 11.52 baht per share. Hence, over the

past 210 business day up to March 5, 2015, the highest closing price of the shares was

12.50 baht per share and the lowest closing price was 8.75 baht per share, as detailed in

the diagram below:

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Graph showing the closing prices of the Company’s shares for the past 210 business days

5.4 Discount Cash Flow Approach

Discounted cash flow approach is a calculation of business value by using the estimated free cash flow that the Company will generate from its future operation to calculate the present value with appropriate discount rate, which is Weighted Average Cost of Capital – WACC of KTIS was applied as the discount rate for calculation of share value of KTIS.

To estimate the future cash flow of KTIS and subsidiaries, IFA has reviewed historical performance, estimated sales plan and business plan of KTIS and subsidiaries in order to prepare the financial projection from years 2015 – 2019. In any case, the projection of KTIS and subsidiaries is based on the assumption of going concern of the Company’s business operation under the current economic conditions. Other external factors affecting business operation of KTIS and subsidiaries, may change the financial projection significantly. Therefore, the share price evaluated from DCF may also be change and cannot be used as a reference other than for this purpose.

Major Assumptions for Projected Cash Flow for years 2015-2019 1. Revenue and Services

1.1 Sugar Business

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For the past 1-2 years, global sugar market has been under over-supply situation,

while demand has not yet been recovered. However, demand and supply of global

sugar market should begin to adjust to a more balanced stage. IFA expects that

KTIS can maintain revenue and growth rate at 5% for the period of 5 years, a level

not exceeding the growth rate that the company has made since the year 2012.

For the sugar price, which is a commodity product, the price will fluctuate

accordingly to the fluctuation of the economy; demand and supply of world sugar

market; weather conditions during planting period and the projected selling price of

sugar. IFA assumes a fixed selling sugar price based on the average selling sugar

price in year 2014 at 14,836.8 baht per ton constant for the full period of the

projection.  

units : Tons 2012 2013 2014 2015(F) 2016(F) 2017(F) 2018(F) 2019(F)

Selling volume of sugar 1,504.0 888.9 1,000.8 1,050.8 1,103.3 1,158.5 1,216.4 1,277.2

8.12% -40.90% 12.59% 5.0% 5.0% 5.0% 5.0% 5.0% Average selling sugar price 13,544.9 15,289.1 14,836.8 14,836.8 14,836.8 14,836.8  14,836.8 14,836.8  9.59% 12.88% -2.96% - - - - -

1.2 Revenue from Supplementary Businesses 1.2.1 Ethanol Business Usage of ethanol in Thailand continues to grow higher due to higher domestic

demand as a result of the government policy on alternative energy promotion.

During the past 3 years, price of ethanol has increased because domestic demand

on ethanol continues to grow. However, the oil price has been reduced by over

50% since the third quarter of 2014. Now it trades at approximately $45-55 per

barrel causing the incentive for ethanol demand to reduce, as well as the price of

ethanol. In fact, domestic ethanol price has been regulated by the authorities. IFA

assumes the selling volume at 68,819 units per ton or about 90% of maximum

capacity and selling price at 25.23 Baht per litre constant throughout the projection

period based on the figures in year 2014.

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units : Tons 2012 2013 2014 2015(F) 2016(F) 2017(F) 2018(F) 2019(F) Selling volume of ethanol 57,700.0 66,059.0 68,819.0 68,819.0 68,819.0 68,819.0  68,819.0 68,819.0 

7.35% 14.49% 4.18% - -  -  -  - Selling price of ethanol 20.97 23.39 25.23 25.23 25.23 25.23  25.23  25.23 -5.88% 11.54% 7.87% - - - - -

1.2.2 Paper Pulp Business Paper pulp is made form bagasse, a by-product of sugar production process.

During the past 3 years, growth for the selling of Paper pulp from bagasse has

continued to reduce due to the usage of bagasse as a raw material in power

generation process of the Company instead. The profit margin for power

generation is normally higher. IFA estimates that growth for the selling volume of

Paper pulp from bagasse will continue to decrease by 10% in 2015 and 2016 due

to the increasing usage of bagasse in its 2 new power plants which will begin

operation in mid-2015 and 2016 respectively. From year 2017-2019, the selling

volume of paper pulp is assumed to be fixed and the selling price shall be based

on the price in year 2014 at 18,702 Baht per ton constant throughout the projection

period.

units : Tons 2012 2013 2014 2015(F) 2016(F) 2017(F) 2018(F) 2019(F)

Selling volume of paper pulp 95,764.0 87,509.3 85,458.28 76,912.5 69,221.3 69,221.3 69,221.3 69,221.3

-8.00% -8.62% -2.34% -10.0% -10.0% - - -

Selling price of paper pulp (Baht/ton)

17,483 17,091 18,702 18,702.0 18,702.0 18,702.0 18,702.0 18,702.0

-9.95% -2.24% 9.43% - - - - -

1.2.3 Power Plant Business 

Power production and distribution of the Company use bagasse left over from sugar

production process as a raw material. At the moment, KTBP, a KTIS subsidiary,

can produce electricity for commercial purpose at 60 MW of capacity. For power

plants of the Company and other subsidiaries, most capacities will be consumed by

internal production process of the Company’s group. According to the Company

plan, the Company shall realize revenue from a new biomass power plant under

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TEP at 50 MW of capacity in the second half of 2015 and another new power plant

under RPBP at 50 MW of capacity in early 2016. IFA assumes that the selling

volume of electricity shall be fixed during the years 2017-2019. The selling price

per unit shall be based on the price in year 2014 at 3.5 Baht per unit constant

throughout the projection period. 

unit : 1,000 KW/hour 2012 2013 2014 2015(F) 2016(F) 2017(F) 2018(F) 2019(F)

Selling volume of electricity

27,901.8 77,911.6 175,110.7 324,000.0 468,000.0 468,000.0 468,000.0 468,000.0

-18% 179% 125% 85% 44% - - -

Selling price of electricity (Baht/unit)

3 3.4 3.5 3.5 3.5 3.5 3.5 -

2. Cost of Goods and Services

Cost of goods sold of the Company and its subsidiaries come mainly from sugar business where revenue consists of 80% of total revenue. Major cost is cost of sugar cane consisting of 85%-90% of total cost of goods sold. The rest are overheads and labor expenses. For cost of sugar cane, it shall be allocated based on benefit sharing method at 70:30 with 70% allocated to farmers and 30% to sugar factory, regulated by government authorities of cane and sugar industry. For related businesses such as paper pulp business, ethanol business and power generation business, major costs come from raw materials, left over from the sugar production process such as bagasse and molasse, fuel cost, logistics cost and labor cost. IFA assumes that cost of goods sold for each business shall be based on average numbers incurred during the years 2012-2014 throughout the projection period.

3. Selling, General & Administration (SG&A) Expenses SG&A of the Company and its subsidiaries includes contributions to the Office of the Cane and Sugar Board, human resources, transportation and export fee. SG&A during years 2012-2014 were 3,568.8 million baht, 3,092.9 million baht and 3,419.2 million baht respectively or 14.50%, 17.10% and 17.00% of total revenue respectively. IFA assumes that SG&A during years 2015-2019 shall average at 16.20% of total revenue.

4. Turnover Ratios Turnover ratios are based on past figures.

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Estimated average account receivable turnover 30 days Estimated average account payable turnover 90 days Estimated average inventory turnover 90 days

5. Capital Expenditure According to new investment projects of the Company in 2015, details are as follows.

Capital Expenditure Million Baht RPBP (Power plant 50 MKW) 432.81 TEP (Power plant 50 MKW) 155.70 KTIS (Project liquid Sucrose and Super refined) 632.85 TIS (Renovation and expansion) - Other investments to improve production efficiency and environment 64.65

Total 1,286.01

6. Bank Loans Repayment of long-term bank loans shall be paid in line with cash flow and according to terms and condition of loans.

7. Corporate Income Tax Corporate Income Tax shall be at 20% throughout the projection period.

8. Terminal Value Growth rate of cash flow after projection period from year 2019 onwards for the Company and its subsidiaries shall be assumed at 0 percent.

9. Discount Rate For valuation of the Company shares, IFA shall use the present value of cash flows from operations with weighted average cost of capital (WACC) as the discount rate. Details of calculation shall be as follows:

WACC = D*Kd*(1-t) + E*Ke = 7.32% D = interest-bearing debts of financial institutions

E = total equities Kd = cost of debts of financial institutions, calculated by average

annual interest rate in 2014 at 6.5%. t = Corporate Income Tax at 20% per year. Ke = cost of equity, based on Capital Asset Pricing Model (CAPM):

Ke = Rf + Beta (Rm-Rf) at 8.813%

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By means of Rf = Risk Free Rate, with reference to 15-year government bond at

3.15% percent (source: www.thaibma.or.th, as of 6 March 2015). Beta = Coefficient based on the risk premium referred to variance of daily

return of the stock market compared to the closing price of the Company's shares from the first trading date of 28 April 2014 to 5 March 2015, one day before BOD meeting, at 0.533 (source: Bloomberg).

Rm = Average market return in stock market, calculated from SET index for the past 15 year at 13.39 percent. The period shall be long enough to reflect investment environment in stock exchange. (Source: SET from year 2000 to February 2015).

Summary of Cash Flow in years 2015 - 2019

units : million Baht 2015(F) 2016(F) 2017(F) 2018(F) 2019(F) Net Profit 1,463.00 1,659.00 1,708.00 1,759.00 1,811.00 Add Depreciation 794.00 1,012.00 906.00 812.00 728.00 Deduct Capital Expenditure (1,286.00) - - - - Add/(Deduct) Working Capital 2,007.00 (98.00) (72.00) (75.00) (80.00) Deduct Bank Loans (300) (300) (300) (300) (300) Net Cash Flow 2,678 2,273 2,242 2,196 2,159 Terminal Value 29,495 NPV of cash Flow 2,495 1,974 1,814 1,655 1,517

NPV of Terminal Value 20,718

Total NPV 30,173

Number of shares 3,860

Price per Share (Baht) 7.82

Based on assumptions to estimate cash flows, share price of the Company shall be 7.82 Baht per share. IFA has prepared sensitivity test for discount rates increase or reduce by 5% from the discount rate used in calculation above. The share price of the Company shall be in the range of 7.45 to 8.22 Baht per share.

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5.5 Summary of Valuations on the Company’s Share Price Comparison of valuation methods shall be summarized as follows.

Valuation Methods Valuation

Price Offering

Price

Valuation Price Higher/(Lower) than the

Offering Price Baht %

1. Book Value method 2.22 12.44 (10.22) (82.15)

2. P/BV method 3.37 - 3.77  12.44  (8.67) - (9.07) (69.69) - (72.91)

3. P/E method 6.15 - 7.41 12.44  (5.03) - (6.29) (40.43) - (50.56)

4. Market Value method 10.92 - 11.52  12.44  (0.92) - (1.52) (7.40) - (12.22)

5. Discounted Cash flow method 7.45 - 8.22  12.44  (4.22) - (4.99) (34.92) - (40.11)

From the table above, it can be seen that the share price of the Company valued by the various methods generates the price between 2.22 – 11.52 baht per share. For the book value approach, the method reflects the net asset value at the time. However, it does not reflect the real value at the present, or the ability to make profit in the future. Therefore, the use of this method is not appropriate to consider the fair value of the Company. The price to book value (P/BV) method and price to earnings per share (P/E) method might not be the appropriate method to evaluate the fair value of the Company, as this method reflect on the financial position and operating results at a specific time, by comparing to the related industries without regarding to the business potential and the ability to make profit. For the discounted cash flow method, it is a method that reflects the ability of the Company to generate profit in the future. However, the method is based on the financial estimation based on assumptions and several factors such as the commodities price in the global market, which has a high volatility and reliance on demand and supply of the global market and economic conditions. The IFA has the opinion that this method of valuation depends on several factors that are constantly changing especially the business of the Company where the commodity price is dependent on the global market. Therefore, the valuation might not reflect the fair value of the Company. However, the valuation of this method considered the present value of the cash flow, economic condition and assumptions. Therefore, if the

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assumption used in the assessment change significantly, the value of shares may differ from the estimation. The Independent Financial Advisor has an opinion that the suitable valuation method for the Company’s share price is the Market Value Approach, which is the method that reflects the value from the demand and supply in the Stock Exchange Market, whereby the investors would have considered the various information of the Company, as well as the external factors that could affect the financial results of the Company. According to this method, the price is valued at 10.92 – 11.52 baht per share.

6. Summary of Independent Financial Advisor’s Opinion on the White Wash

IFA is of the opinion that the offering of newly issued common shares to the Waiverer will benefit KTIS and subsidiaries as this shareholding change will benefit the business and shareholders of the Company due to the increase in shareholding by the strategic partner which result in the sustainable business support and expansion for the future growth, including:

Creating business opportunities and strengthen the competitiveness of the Company by having Japanese partner, Sumitomo, the global trading company with the distribution network to retail and corporate customers.

Companies can improve the quality of the sugar and other related products effectively along with the value added products to increase the profitability of the Company, due to the technology from the Japanese partner, Nissin, the second ranked sugar producer and distributor in Japan.

In addition, the Waiverer has no intention to change any business policy and management structure of the Company, but to carry out the current business with support and increased efficiency for future growth, which will enhance the prospect of the Company and bring benefits to the shareholders. Furthermore, the purpose for this issuance of new shares is mainly for restructuring the shareholding structure amongst the major shareholders, and the amount of newly issued shares allocating to the Waiverer is only 10 shares, which will not cause significant control dilution effect or dilute earnings per share.

Nevertheless, this transaction will result in the Waiverer holding over 25 percent of the issued shares

of the Company, and will be able to block vote in the Annual General Meeting of Shareholders that need not

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less than 3 out of 4 of the total votes at the meeting and entitled to vote. Therefore, the existing shareholders

might be affected by the change in Voting Rights.

The price of the newly issued shares allocating to the Waiverer at 12.44 Baht per share is appropriate since the price is higher than the share price valued by Financial Advisor using the Market Value Approach, which is 10.92 – 11.52 Baht. The valuated price is 0.92 – 1.52 Baht per share, equivalent to 7.40 – 12.22 percent, lower than the offering price.

For the reasons mentioned above, the IFA has the opinion that the transaction is appropriate. Price

and terms of the transaction are fair and should benefit the Company and the shareholders in the future. The shareholders should approve the Waiverer from making a tender offer. However, the decision to approve the transaction or not is at the full discretion of the shareholders.

Independent Financial Advisor

AIRA Securities Public Company Limited

Operation Controller Chief Executive Officer

.................(signed).................. ..…………(signed)………….

(Apilerd Wangsutham) (Pairoj Laungthaleongpong)