Page 15 - Annual Report English 2018

Tycoons Worldwide Group (Thailand) Plc.

3.1.4 Risk of high proportion of the sales transaction through the majority shareholder
TGE

Currently, TYCN’s largest customer for sales of merchandise, including wire rod
and annealed wire, is Tycoons Group Enterprise (TGE), TYCN’s indirect majority
shareholder via Tycoons Group International Co., Ltd.(TGI), (TGE holds a stake of
up to 100% in TGI and TYCN is a 72.91% owned subsidiary of TGI). TYCN’s
sales to TGE accounted for 16.66% of TYCN’s total sales in 2018. Although the
proportion is higher, the actual risk is still at a low level because TGE is TYCN’s
agent in Taiwan market and it has built a firm customer base.

3.2 Financial risks
3.2.1 Exchange rate and interest rate

TYCN’s raw materials are billet and wire rod. In 2018, 60% of them were from TY
in THB, while 40% were imported in USD. However, 43% of products were
exported mostly in USD and minorly in EUR. Therefore, the imports and exports in
USD can balance each other, resulting in a natural hedge. TYCN can also avoid the
foreign exchange risk by signing forward contracts to offset the net foreign
exchange position. TYCN group uses USD loans for working capital and long term
investment. Therefore, the interest rate should be carefully watched. TYCN can
choose interest rate exchange or repay USD loans by using THB loans to avoid risks
of foreign exchange rate and interest rate.

TYCN engages in derivatives trading based on actual need and according to
TYCN’s Procedures of engagement in derivatives trading」. In addition to hedge
tools for foreign exchange rate and interest rate, TYCN also take actions such as:

(1) Set up foreign exchange rate monitor system to get real time information on
exchange rate.
(2) Get reports and hedge strategies about foreign exchange market from banks on a
daily basis.
(3) Check the net foreign exchange position on a daily basis and adjust it according
to the updated information.

3.2.2 Credit policy
There is no significant credit risk between TYCN and its customers. TYCN set
credit lines for its customers by market, products and payment terms. TYCN
controls shipment and collection by using ERP, which allows TYCN to instantly
monitor the status of customers’ credit lines. An approval is necessary for any
shipment which is over credit line. A guarantee deposit, advance payment, or AR
insurance is required when a shipment is made with long payment term or to a high-
risk market.

3.2.3 Software and Web technology
The whole production and management of TYCN’s operation are controlled by
ERP and internet system. TYCN has protective measures and backup plan to
prevent the company from suffering from unexpected power failure, hardware
damages and hacker attacks.

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