The Opinion of the Independent Financial Advisor for Assets Acquisition Transaction SKY ICT ...

120 Pages·2017·0.54 MB·English

The Opinion of the Independent Financial Advisor
for Assets Acquisition Transaction

Of

SKY ICT Public Company Limited

prepared by

Advance Capital Services Company Limited

9 February 2018
The Opinion of the Independent Financial Advisor for Assets Acquisition Transaction of
SKY ICT Public Company Limited 

No. ACS/001/2018
9 February 2018

Subject The opinion of the Independent Financial Advisor for Assets Acquisition Transaction of
SKY ICT Public Company Limited
To Board of Directors and Shareholders of SKY ICT Public Company Limited
Refer:
1. Approved to propose Board of Director Meeting Sky ICT Public Company Limited (“SKY”) No. 21/2017
held on 15 December 2017 and amendment No. 1, No. 2 and No. 3 dated 19, 26 and 29 December
2017 respectively. And Information Memorandum regarding the Acquisition of Assets of Sky ICT Public
Company Limited. Approved to propose to the Shareholders’ Meeting to consider and approve the
purchase as 34 percent of all ordinary shares of Turnkey Communication Services Co., Ltd.
2. Financial Statements of SKY audited by Pricewaterhouse Coopers ABAS Limited ended September
30, 2017 by Mr. Pisit Thangtanagul Certified Public Accountant Registration No. 4095 and reviewed
by office of Pitisevi Co., Ltd. ended December 31, 2016 December 31,2015 and at December 31,
2014 by Ms. Wannee Ongruen Certified Public Accountant Registration No. 7750
Financial Statements of Turnkey Communication Services Co., Ltd. (“TKC”) and Turnkey
Communication Services Plus Co., Ltd. (“TKCP”) ended December 31, 2016 December 31, 2015 and
at December 31, 2014 Audited by Smart Auditing Co., Ltd. by Mr. Rongjit Charnchaina Certified Public
Accountant Registration No. 8992
Financial Statements of IBS Corporation Co., Ltd. (“IBS”) ended December 31, 2016 December
31,2015 and at December 31, 2014 Audited by Smart Auditing Co., Ltd. by Mr. Rongjit Charnchaina
Certified Public Accountant Registration No. 8992
3. Report evaluates and monitors the financial status of TKC by JP Tip Audit Company Limited. As at
January 5, 2018, Mr. Thanong Sakpetpradit Certified Public Accountant Registration No. 8819
4. Report Internal Audit control system of TKC prepare by AIM to propority, Limited on 4 August 2017,
14 June 2017 and 27 October 2016.
5. Annual Registration Statement of the year 2016 of SKY
6. Draft of the Entire Business Transfer Agreement between Sky ICT Public Company Limited and P.M
Enterprise Holding Co., Ltd.

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The Opinion of the Independent Financial Advisor for Assets Acquisition Transaction of
SKY ICT Public Company Limited 

7. Draft a business agreement between Sky ICT Public Company Limited , Turnkey Communication
Services Co., Ltd. and Mr.Pimarn Tiewtranon
8. Affidavit, Memorandum of Association and other documents, including interviews with the management
and staff of SKY, TKC, TKCP and IBS

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The Opinion of the Independent Financial Advisor for Assets Acquisition Transaction of
SKY ICT Public Company Limited 

Content
Executive Summary ............................................................................................................................................... 7
Summary of Opinion of the Independent Financial Advisor ............................................................................... 10
Part 1: Characteristic, Type, and Size of the Transaction .................................................................................. 12
1.1 General characteristic of the transaction ............................................................................................... 12
1.2 Day / Month / Year of the Transaction .................................................................................................. 15
1.3 Relating parties and their relationship with SKY ................................................................................... 16
1.4 Type and Size of the Transaction ......................................................................................................... 17
1.5 Details of the Acquired Assets ............................................................................................................... 18
1.6 Total Value of Consideration ................................................................................................................. 22
1.7 Potential Benefits to SKY ....................................................................................................................... 24
1.8 Source of Fund ....................................................................................................................................... 25
1.9 Conditions for Entering into the Transaction ......................................................................................... 25
1.10 Opinion of the Board of Directors on the entering into the Transaction .............................................. 25
Part 2: Reasonableness of the Transaction ........................................................................................................ 27
2.1 Objective and necessity of the transaction ........................................................................................... 27
2.2 Benefits and Impacts of Entering into the Transaction ......................................................................... 28
2.3 Summary of material agreements ......................................................................................................... 40
Part 3: Business Valuation ................................................................................................................................... 43
3.1 Valuation of Sky ICT Public Company Limited (“SKY”) ........................................................................ 43
3.1.1 Book Value Approach ................................................................................................................ 43
3.1.2 Adjusted Book Value Approach ................................................................................................. 44
3.1.3 Historical Market Price Approach .............................................................................................. 46
3.1.4 Market Comparable Approach ................................................................................................... 46
3.1.5 Discounted Cash Flow Approach .............................................................................................. 48
3.2 Valuation of Turnkey Communication Service Co., Ltd. (“TKC”) .......................................................... 58
3.2.1 Book Value Approach ................................................................................................................ 58

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The Opinion of the Independent Financial Advisor for Assets Acquisition Transaction of
SKY ICT Public Company Limited 

3.2.2 Adjusted Book Value Approach ................................................................................................. 59
3.2.3 Market Comparable Approach ................................................................................................... 61
3.2.4 Discounted Cash Flow Approach .............................................................................................. 64
3.3 Summary of valuation of SKY and TKC Share Swap Ratio ................................................................. 82
3.4 Share Swap Ratio .................................................................................................................................. 83
Part 4 Conclusion of IFA Opinion ........................................................................................................................ 84
Appendix ............................................................................................................................................................... 86
1. Information of Sky ICT Public Company Limited (“SKY”) ..................................................................... 87
2. Information of Turnkey Communication Services Co., Ltd. (“TKC”) ................................................... 102
3. Information of Turnkey Communication Services Plus Co., Ltd. (TKCP) ........................................... 113
4. Information of IBS Corporation Co., Ltd. (IBS) .................................................................................... 116

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The Opinion of the Independent Financial Advisor for Assets Acquisition Transaction of
SKY ICT Public Company Limited 

Abbreviations or Definitions
“SEC” The Securities and Exchange Commission of Thailand
“SET” The Stock Exchange of Thailand
“SKY” Sky ICT Public Company Limited
“TKC” Turnkey Communication Services Co., Ltd.
“TKCP” TKC Communication Services Plus Co., Ltd.
“IBS” IBS Corporation Co., Ltd.
“Independent Financial Advisor” Advance Capital Services Company Limited
or “IFA”
“PMNH” P.M Enterprise Holding Co., Ltd.
“JP” JP Tip Audit Company Limited.

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The Opinion of the Independent Financial Advisor for Assets Acquisition Transaction of
SKY ICT Public Company Limited 

Disclaimers
1. The study results and opinions of the Independent Financial Advisor in this report, are based on
information and assumptions obtained from the management of SKY, TKC, TKCP and IBS and also
from publicly disclosed information available on the websites of the Office of the Securities and
Exchange Commission (www.sec.or.th) and the Stock Exchange of Thailand (www.set.or.th).
2. The Independent Financial Advisor will not be responsible or liable for any profit, loss or effect incurred
by the transaction and/or by SKY, TKC, TKCP and IBS future performance from the transaction.
3. The Independent Financial Advisor's study was conducted by using knowledge, skills, and cautions,
based on sound professional practices.
4. The Independent Financial Advisor determined and analyzed the transaction based on current
situations and information available to our knowledge. If there is any material adverse change and
effect of the situations and information, it may affect the opinions provided herein by the Independent
Financial Advisor.

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The Opinion of the Independent Financial Advisor for Assets Acquisition Transaction of
SKY ICT Public Company Limited 

Executive Summary
Sky ICT Public Company Limited (“SKY”) intends to expand its business into the government complex
projects which requires specialized engineers. SKY foresees that having strategic partner who has specialized
engineers will help expand its competitive capacity and its targets i.e. various government projects in the future.
Therefore, SKY has selected the qualified strategic partner which is Turnkey Communication Services Co., Ltd.
(TKC). SKY has agreed to buy TKC shares from PM Enterprise Holdings Limited ("PMNH"), whereby Mr.Pimarn
Tiewtranon is the major shareholder. By Entire Business Transfer (EBT)
SKY will enter into an agreement to purchase 680,000 shares of TKC at the par value of THB 100,
calculated as 34.0 percent of total ordinary shares of TKC from PMNH at the sale and purchase price of THB
1,555,500,000 will pay for the shares of TKC by offering up to 91,500,000 ordinary shares with the par value
of THB 0.50 on private placement basis at the offering price of THB 17.0 per share, which SKY views that such
price is at the most beneficial to shareholders when considering the value of TKC and the value of SKY’s
shares. Such offering price is not less than 90 percent of the Market Price according to the related Notification
of the Securities and Exchange Commission. The “Market Price” means the weighted average price of SKY’s
shares listed on the SET for the previous 7 - 15 consecutive business days prior to the resolution of the Board
of Directors’ Meeting proposing the Shareholders’ Meeting to approve the capital increase and the allocation
of the newly issued shares, which was the share price average of 15 consecutive business days between
November 22, 2017 –December 14, 2017 equal to THB 16.63 per share calculated by weighted average price
(total trading value weighted by all trading transaction shares for all over the mentioned period.) to PMNH
consideration of the sales of TKC’s shares to SKY instead of cash.
The transaction size is maximum at 250.03 percent when calculated under the value of consideration
criteria, considered as Type 4 transaction or backdoor listing, according to Acquisition and Disposal Rule.
Therefore, SKY is required to:
(1) Prepare report and disclose the information memorandum of such transaction to the SET
immediately
(2) Appoint an independent financial advisor and deliver the report of the independent financial
advisor’s opinion together with the notice convening the Shareholders’ Meeting to all shareholders. SKY already
appoint Advance Capital Service Co., Ltd. which has been in the list of qualified financial advisor from SEC to
provide independent opinion toward the Shareholder
(3) Convene the Shareholders’ Meeting for an approval on the entering into the transaction on
February 23, 2018
(4) Approved the transaction to the SET. Applying for new securities with the SET. According to
the SET regulations. With regard to the receipt of ordinary shares or preferred shares as listed securities without
delay. However, the Transaction is fall under the four criteria for exemption of submission of relisting application

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The Opinion of the Independent Financial Advisor for Assets Acquisition Transaction of
SKY ICT Public Company Limited 

according to Clause 24 of the Notification of the Stock Exchange of Thailand Re: Disclosure of Information and
Practice of Listed Companies Concerning the Acquisition and Disposal of Assets B.E. 2547. For more details,
see Section 2.2.
After completion of the transaction, PMNH, as the seller of TKC shares, will acquire 91,500,000 shares
of SKY, representing 18.91% of SKY's total voting rights and PMNH will register the dissolution and liquidation.
It will divide the remaining assets. SKY's shares are offered to PMNH's shareholders, namely, Mr. Pimarn. In
the end, Mr.Pimarn will become a shareholder of 18.91% of SKY's total voting rights.
In addition, on the date of issuing new shares (offering date) where expects to be in March 2018, if
the re-calculation of offering price is at a discount of more than 10 percent from market price (calculated from
the weighted average of trading price during the past 15 working days before the offering date), Mr.Pimarn
Tiewtranon being a major shareholder is required to comply with the SET rule regarding silent period. Silent
period will be applied for 1 year from the first trading day of such shares. Upon completion of every 6-month
period of trading of the shares on the SET, Mr.Pimarn Tiewtranon being a major shareholder shall be able to
gradually sell the shares at 25 percent of the number of all shares which is subject to the silent period.
The transaction will be executed after (a) SKY receives the result of TKC Due Diligence and agrees
to enter into the Transaction. The Board of Directors SKY No. 1 on January 15, 2018, has concluded that the
results of the monitoring of TKC is satisfactory. And proceed to the next step. (b) SKY gets an approval from
the Extraordinary General Meeting of Shareholders No.1/2018 of SKY which will be held on February 23, 2018,
and (c) The Office of Securities and Exchange Commission (the “SEC”) approves SKY offering new shares
specifically for private placement, namely PMNH, to pay for TKC shares in cash.
The total value of consideration is equal to THB 1,555,500,000 for the sale and purchase of 34.0
percent of shares in TKC. Such total value has been determined by the negotiation between SKY and the
Seller by taking into consideration of certain factors, including backlog and P/E ratio of comparable businesses
(Peers Comparison). The details of calculation are as follows:
 Backlog
SKY has evaluated the information from due diligence report and internal information from
TKC. As of September 30, 2017, TKC had signed contracts in the number of 52 projects and
backlog equal to THB 2,993.9 million. SKY estimates that the gross profit to be generated
from backlog in the year 2017 shall not be less than THB 250.0 million. Such gross profit has
not included the revenue to be derived from future projects which TKC’s management has
expected to be awarded and recognized within the year 2018. As a result, when gross margin
combined with future project revenue minimize selling and administrative expenses and other
expenses. Based on such assumptions, SKY has estimated that TKC would have profits in
the year 2018 of not less than THB 250.0 million.

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The Opinion of the Independent Financial Advisor for Assets Acquisition Transaction of
SKY ICT Public Company Limited 

 P/E Ratio
SKY apply the method to compare the share price of the companies in the same industry to
TKC which are the listed companies, namely SAMART, JTS, INET, AIT, FORTH, ILINK, ALT
and SAMTEL. SKY takes into account certain factors i.e. the previous projects, nature of
business and market capital. The average historical trailing 15 days of P/E ratio during 22
November 2017 to 14 December 2017 equal to 23.7 times. However SKY has evaluated the
value of consideration by using P/E ratio of 18.3 times, which is lower than the average
historical trailing 15 days of P/E ratio of the companies in the same industry (Peers).
From forecasts profits in the year 2018 of not less than THB 250.0 million and P/E ratio of 18.3 times
SKY has estimated total value of TKC based on the above assumption, equal to THB 4,575.0 million or equal
to THB 1,555.5 million, in proportion of 34.0 percent of total value of TKC.
There is 7 out of 8 directors of SKY attending the Meeting which consists of 4 directors and 3 members
of audit committee. The Board of Directors’ Meeting has approved to propose to the Shareholders’ Meeting to
consider and approve to propose to the shareholders' meeting to approve the acquisition of shares of TKC
from PMNH according to the details proposed. Which SKY views that such price is at the most beneficial to
shareholders when considering the value of TKC and the value of SKY’s shares. Such offering price of THB
17.0 per share is not less than 90 percent of the Market Price according to the related Notification of the
Securities and Exchange Commission. The Board of Directors considers that the transaction value is justifiably
in the best interest of SKY and its shareholders. In addition, the assumption of TKC’s net profits in the year
2018, equal to THB 250.0 million, has been carefully and thoroughly made and P/E ratio used in the valuation
is lower than P/E ratio of the companies in the same industry. The Board of Directors believes that upon
entering into the transaction will be benefit to SKY in respect of having new business partner with TKC which
has experiences in operating on government project and private project over 15 years. SKY has a plan to utilize
the TKC’s experience and expertise through bidding projects with TKC in the future.

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