My take and thoughts on Tien Wah Press Holdings Berhad, as of Aug 2013, on its fundamental and potential. This is not a recommendation for investment.

1. TIEN WAH PRESS HOLDINGS BERHAD
(KLSE: TWP)
Presenter: Kenneth Lai (kennethlai.kl@gmail.com)

2. 1. Investment Thesis – Multiple Drivers of Value
• Recommend investors to buy
Tien Wah Press (TWP) with target share
price of RM3.02, which represents ~26%
upside from the current share price
• 4 Main Points to Investment Thesis
• The market currently views TWP as less
attractive than other packaging companies
thus underestimating its valuation
• Underfollowed by the investment
community
• The market underestimates the levers
TWP can pull to counter negative impact
of competition
• Tougher operating environment would
mean lesser competition into tobacco
segment
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As of 29/8/13; in RM '000 except per share data
Current Capitalization
Share Price 2.40RM
Diluted Shares Oustanding ('mil) 96,495
Market Capitalization 231,588RM
Cash & Equivalents (48,864)
Investment in Associates (13,349)
Debt 97,713
Minority Interest 71,661
Unfunded Pension Liability 1,784
Enterprise Value 340,533RM
Trading Statistics
52-Week Range RM 1.93 - RM 2.65
Dividend Yield 6.6%
Avg. Daily Volume 10,000

3. 2. Business Overview
• Printing (2012 rev: RM187mil):
Production factories in
Malaysia, Vietnam, Australia, printing
for tobacco and FMCG products
• Trading (2012 rev: RM221mil):
Operated via Hong Kong and Singapore
to trade mainly tobacco related products
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Business DescriptionRevenue Breakdown
Printing
46%
Trading
54%
Singapore
49%
Geography
Segment
Australia
30%
Malaysia
17%
Other Countries
4%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
1.00
1.20
1.40
1.60
1.80
2.00
2.20
2.40
2.60
2.80
Jan-07 Oct-07 Jul-08 May-09 Feb-10 Dec-10 Sep-11 Jul-12 May-13
RM'Mil
Tien Wah Press Holdings Bhd (KLSE:TIENWAH)
- Volume
Tien Wah Press Holdings Bhd (KLSE:TIENWAH)
- Share Pricing
2008: Acquisition of factory in
Australia and established a
full office in Hong Kong
2007: Acquisition of a factory in
Vietnam
2009: Acquisition of a second
factory in Vietnam
Acquisitions

4. 3. Valuation Analysis
• TWP currently trades at 4.6x
forward EV/EBITDA versus its
peer average of 5.7x and 5yr
average EV/EBITDA of 5.2x
• On a forward P/E basis, TWP
currently trades at 7.2x
– This is a significant
discount to its peer average
of 10.1x and 5yr historical
average P/E of 7.8x
• Based on the assessment on
P/E, EV/EBITDA and
Discounted Cash Flow
Analysis (DCF), we arrive at a
target share price of RM3.02 or
~26% upside to today’s share
price
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Methodology Target Price
(RM '000 except per share data) Base Bear Bull
FY2013 Estimates
EBITDA 71,923RM 68,374RM 72,855RM
EPS 0.27RM 0.25RM 0.28RM
FCFF 27,841RM 30,530RM 27,135RM
Target Forward Multiples
EV/EBITDA1
4.7 x 3.7 x 8.4 x
P/E1
8.8 x 5.9 x 14.3 x
P/FCFF 10.0 x 8.9 x 10.3 x
Equity Price per Share
EV/EBITDA x EBITDA 3.10RM 1.83RM 5.25RM
P/E x EPS 2.74RM 2.05RM 3.97RM
DCF Implied Equity Value 3.21RM 2.35RM 3.43RM
Target Price 3.02RM 2.08RM 4.22RM
Upside (Downside) 26% -13% 76%
1
Based on public comparables

5. 4. Catalysts
• No sell-side coverage or conference
calls, under the “unexciting” packaging
sector
• Illiquid due to low floatation ~35%
with ~54% owned by ultimate
shareholder and ~14% held by
Lembaga Tabung Angkatan Tentera
• Market underestimating TWP strength
as the market leader in tobacco product
packaging – pricing power
advantage, as well as being the one of
the top 5 commercial printing
companies in Malaysia
• Niche business: Concentration in
tobacco segment in addition to F&B
segment
5
Possible Reasons for Undervaluation
• Price discovery: research rating
initiation improves awareness
• Liquidity improvement via rights
issuance
• Margin expansion: operational
efficiency has continually improve and
wastage reduced over the years
• Acquisition of core business related
companies to increase market share and
enhance economies of scale
Catalysts

6. 5. Strong Management Team & Cash Returns
• Strong and committed
management team with
laser focus on
cost, return, quality and
customer satisfaction
• Experienced management
team from holding
company providing strong
continuous support
• EBITDA margin +161bps
and ROIC + 143bps from
2009 to 2012
6
Key Management
Tengku Tan Sri Dr. Mahaleel
Non-Executive Chairman
Jacco Djike
Group General Manager
“…customer complaints reducing by 30% from 2011.”
“…an average of 20% of production time spent on
product development and further quality programmes…”
- Jacco Djike
Cash Return to Shareholders
• Strong FCFF generation has allowed TWP
to pay down corporate debt and achieve the
lower end range of target debt/equity ratio of
0.2x and net debt/EBITDA ratio of 0.6x
• Such prudent capital management has
enabled TWP to consistently return dividend
to shareholders with an 5yr average dividend
payout ratio of ~50%
• We expect for a dividend payout of 35% of
FCFF for the next 5 years, assuming no
minimal debt repayment over the same
period. This represents a dividend yield of
~5% on top of capital gains.

7. 6. Risks and Mitigants
• Australia plain packaging law that was announced in late 2012
– Such measure has prompted four countries
(Ukraine, Cuba, Honduras, Dominican Republic) backed by BAT and Philip
Morris to file a trade dispute at the World Trade Organisation. TWP operates in
a niche market serving tobacco customers, where tougher operating
environment would mean lesser competition and new market entrant
• Customer concentration risk
– TWP has a 7+3 (7 years plus rights to 3 years extension) contract agreement
with BAT. Switching cost should be medium to medium high which includes
but not limited to compromise on quality, supply chain, and negotiation on
trade terms. Hence we believe there will be significant hurdles/switching cost
for BAT to switch from TWP to other suppliers.
• Emergence of 3D printer
– 3D printer has not reached its critical mass for mass productivity. Even if it
materializes, TWP has more than sufficient FCF, cash and low leverage to hop
on the 3D printer bandwagon. Management has always kept themselves current
with the latest technological advancement to stay ahead of their competition.
7

8. 7. Investment Recommendation: Buy TWP at RM2.40
Multiple drivers to realize TWP’s intrinsic value of RM3.02 per share
• Tougher operating environment would mean small players would give in to the
competition, and TWP has healthy balance sheet to acquire at depressed prices
• TWP’s is underfollowed and business model is misunderstood
• Strong revenue growth opportunities outside South East Asia
• Strong support from holding company with strategic partnerships to continually
enhance cost synergy
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