Wintronics, Inc.

STOR-Max

Pre-Tax Cost of Debt

Tax Rate
After-Tax Cost of Debt
Asset Beta

6.6%

6.6%

24.5%
4.99%

24.5%
4.99%

1.21

1.33

Star River Source

6.6% Bond Yield

24.5%
4.99%

Exhibit 1

1.27 AVERAGE OF PEER COMPANIES

Levered Beta
Risk-Free Rate
Equity Market Risk Premium
CAPM Cost of Equity
Gordon Model Cost of Equity

1.56

1.67

3.6%
6.0%
15.0%

3.6%
6.0%
16.0%

3.6%
6.0%
14.1%

Market Value of Debt

438.6

819.8

103.2 long term dent plus short term of 2001

1,132.0

2,454.1

Market Value of Equity

Weight of Debt/Capital
Weight of Equity/Capital
WACC (using CAPM Ke)

1.75

208.2

27.9%
72.1%

25.0%
75.0%

33.1%
66.9%

12.19%

13.27%

11.07%

levered beta formula

Exhibit 2
Exhbit 5

average of peer companies

Exhibit TN2
Analysis of the Packaging-Machine Investment

2001

2002

2003

2004

2005

2006

Maintenance

(15,470)

(15,702)

(15,938)

(4,214)

(4,424)

Labor

(63,700)

(64,656)

(65,625)

(66,610)

(67,609)

Overtime

(18,200)

(18,473)

(18,750)

Depreciation

(72,800)

(72,800)

(72,800)

(210,688)

(210,688)

Total Cost

(170,170)

(171,631)

(173,113)

(281,511)

(282,721)

Tax @ .245

(41,692)

(42,049)

(42,413)

(68,970)

(69,267)

After-tax Cost

(128,478)

(129,581)

(130,700)

(212,541)

(213,454)

+ Depreciation

72,800

72,800

72,800

210,688

210,688

Inflation Rate =

1.50%

Years from Now

If Star River Waits Three Years to Purchase the Machine

- Cap. Expenditure

(2,106,878)

Free Cash Flow

NPV =

(55,678)

(56,781)

(2,164,778)

(1,853)

(2,767)

(1,699,018)

If Star River Purchases the New Machine Now

Maint.

(3,640)

(3,822)

(4,013)

(4,214)

(4,424)

Labor

(63,700)

(64,656)

(65,625)

(66,610)

(67,609)

Depreciation

(182,000)

(182,000)

(182,000)

(182,000)

(182,000)

Total Cost

(249,340)

(250,478)

(251,638)

(252,823)

(254,033)

(61,088)

(61,367)

(61,651)

(61,942)

(62,238)

After-tax Cost

(188,252)

(189,111)

(189,987)

(190,882)

(191,795)

+ Depreciation

182,000

182,000

182,000

182,000

182,000

Tax

- Cap. Expend.

(1,820,000)

+ Tax Shield on Writeoff

of Old Machine

53,508

Free Cash Flow

(1,820,000)

NPV

(1,880,241)

47,256

(7,111)

(7,987)

(102,935)

(49,671)

(2,156,791)

(8,882)

(9,795)

7,029

7,029

Effect of Buying Now vs. Waiting

Advantage of Waiting:
NPV (Wait) - NPV
(Now) =

Change in FCF

181,223
1,820,000

PV Gain from Waiting

181,223

Equiv. Annual Annuity

27,137

Exhibit TN2
Packaging-Machine Investment

2007

2008

2009

2010

2011

2012

2013

2014

10

11

12

13

(4,646)

(4,878)

(5,122)

(5,378)

(5,647)

(5,929)

(6,226)

(6,537)

(68,623)

(69,652)

(70,697)

(71,758)

(72,834)

(73,926)

(75,035)

(76,161)

(210,688)

(210,688)

(210,688)

(210,688)

(210,688)

(210,688)

(210,688)

(210,688)

(283,956)

(285,218)

(286,507)

(287,823)

(289,169)

(290,543)

(291,949)

(293,386)

(69,569)

(69,878)

(70,194)

(70,517)

(70,846)

(71,183)

(71,527)

(71,879)

(214,387)

(215,340)

(216,313)

(217,307)

(218,322)

(219,360)

(220,421)

(221,506)

210,688

210,688

210,688

210,688

210,688

210,688

210,688

210,688

(3,699)

(4,652)

(5,625)

(6,619)

(7,634)

(8,672)

(9,734)

(10,818)

(4,646)

(4,878)

(5,122)

(5,378)

(5,647)

(5,929)

(6,226)

(6,537)

(68,623)

(69,652)

(70,697)

(71,758)

(72,834)

(73,926)

(75,035)

(76,161)

(182,000)

(182,000)

(182,000)

(182,000)

(182,000)

(255,269)

(256,530)

(257,819)

(259,136)

(260,481)

(79,856)

(81,261)

(82,698)

(62,541)

(62,850)

(63,166)

(63,488)

(63,818)

(19,565)

(19,909)

(20,261)

(192,728)

(193,680)

(194,653)

(195,647)

(196,663)

(60,291)

(61,352)

(62,437)

182,000

182,000

182,000

182,000

182,000

(10,728)

(11,680)

(12,653)

(13,647)

(14,663)

(60,291)

(61,352)

(62,437)

7,029

7,029

7,029

7,029

7,029

51,619

51,619

51,619

Exhibit TN3
STAR RIVER ELECTRONICS
Sources and Uses of Funds
(fiscal year ending June 30; all figures in SGD thousands)
1999
2000
2001
(Actual) (Actual) (Actual)
1
2
3
4
5
6

7
8
9
10
11
12

2002

2003

Sources of funds
Net income
Depreciation
Increases in debt
Increases in accounts payable
Increases in other current liabilities
Total sources of cash

6,576
9,028
8,157
491
1,722
25,974

4,889
10,392
35,929
(915)
(1,250)
49,045

7,148
11,360
11,892
1,479
(3,763)
28,117

5,285
15,260
20,887
1,996
3,198
46,626

3,940
19,160
33,835
2,305
3,677
62,918

Uses of funds
Dividend payments
Increases in cash balance
Increases in accts. receivable
Increases in inventories
Capital expenditures
Total uses of cash

2,000
855
3,216
4,361
15,542
25,973

2,000
419
2,714
26,166
17,746
49,045

2,000
(295)
7,408
9,950
17,254
36,317

2,000
2,075
5,275
9,976
27,300
46,626

2,000
1,180
6,114
11,063
27,300
47,658

Exhibit TN4
Forecasting Assumptions

2000
(Actual)
15.60%

Assumptions
Sales Growth
Production Costs/Sales
Admin. and selling expenses/Sales
Capital expenditures
Depreciation expense for new equipment

2001
(Actual)
14.50%
50.40%
22.80%

2002
2003
(Proj'd)
(Proj'd)
15.00% 15.00%
50%
50%
23%
23%
27,300
27,300
3,900
3,900

Both
Years
Dividend Payout
Melded Interest Rate
Average Tax Rate
Cash to Sales
Days Sales Outstanding
Payables to Cost of Goods Sold
Inventories to Cost of Goods Sold
Other Current Liabs. to Sales

Melded Interest Rate Calculation

Short term Borrowing
Bond Issue
New Era Loan
Finding New Era loan rate:
Last Year's Interest Expense on
Short term Borrowing
Bond Issuance
New Era loan
Total Interest Expense

Amount
84,981
8,200
10,000

5,694
472
1,653
7,818

2000
8%
25%
6.5%
122 took recent year
25%
120%
20%

Rate
Wtd. Rate
6.7%
5.8%
16.5%

Exhibit TN8
Sensitivity Analyses of Borrowings

Base Case
0%
5%
Sales Growth
10%
12%
15%
18%
20%

Bank Debt Debt/Equity EBIT Cov'g.

$139,704
0.67
1.67
$133,878
0.67
1.28
$135,820
0.67
1.41
$137,762
0.67
1.54
$138,539
0.67
1.59
$139,704
0.67
1.67
$140,869
0.67
1.75
$141,646
0.67
1.80

Base Case
43%
45%
47%
49%
51%
53%
55%

Bank Debt Debt/Equity EBIT Cov'g.

$139,704
0.67
1.67
$132,626
0.55
2.58
$134,539
0.58
2.33
$136,452
0.61
2.09
$138,365
0.64
1.84
$140,278
0.68
1.60
$142,191
0.72
1.36
$144,103
0.76
1.12

Production
Costs/Sales

Days Sales
Outstanding

Inventories
to COGS

Base Case
100
110
115
118
120
122
125
130

Bank Debt
$139,704
$131,251
$135,093
$137,014
$138,167
$138,935
$139,704
$140,856
$142,777

Base Case
120%
130%
140%
150%
155%
160%
170%

Bank Debt
$139,704
$139,704
$146,772
$153,840
$160,908
$164,442
$167,976
$175,044

Debt/Equity EBIT Cov'g.

0.67
1.67
0.67
1.67
0.67
1.67
0.67
1.67
0.67
1.67
0.67
1.67
0.67
1.67
0.67
1.67
0.67
1.67

Debt/Equity EBIT Cov'g.

0.67
1.67
0.67
1.67
0.67
1.67
0.67
1.67
0.67
1.67
0.67
1.67
0.67
1.67
0.67
1.67

Exhibit TN5
STAR RIVER ELECTRONICS LTD.
Historical and Projected Income Statements
Fiscal Year Ended June 30,
1998
(Actual)
71,924

1999
(Actual)
80,115

2000
(Actual)
92,613

106,042

33,703
16,733
8,076
58,512

38,393
17,787
9,028
65,208

46,492
21,301
10,392
78,185

53,445
24,177
11,360
88,982

13,412

14,908

14,429

17,059

6 Interest expense

5,464

6,010

7,938

7,818

7 Earnings before taxes

8 Income taxes
9 Net earnings

7,949
2,221
5,728

8,897
2,322
6,576

6,491
1,601
4,889

9,241
2,093
7,148

2,000
3,728

2,000
4,576

2,000
2,889

2,000
5,148

(SGD 000)
1 Sales

2
3
3
4
5

Operating expenses:
Production costs and expenses
Admin. and selling expenses
Depreciation
Total operating expenses
Operating profit

15 Dividends to all common shares

16 Retentions of earnings

2001

2002

2003

121,948

140,241

61,462
27,804
15,260
104,525

70,681
31,974
19,160
121,815

17,423

18,425

10,423

13,207

7,000
1,715
5,285

5,219
1,279
3,940

2,000
3,285

2,000
1,940

Exhibit TN6
STAR RIVER ELECTRONICS
Historical and Projected Balance Sheets
(fiscal year ended June 30; all figures in SGD thousands)
1998
(Actual)
1
2
3
4
5
6
7
8

9
10
11
12
13
14
15

1999
(Actual)

2000
(Actual)

2001
(Actual)

2002

Assets
Cash
Accounts receivable
Inventories
Total current assets
Gross property plant & equipt.
Accumulated depreciation
Net property plant & equipt.
Total assets

4,816
22,148
23,301
50,265
64,611
(4,559)
60,052
110,317

5,670
25,364
27,662
58,697
80,153
(13,587)
66,566
125,262

6,090
28,078
53,828
87,996
97,899
(23,979)
73,920
161,916

5,795
35,486
63,778
105,059
115,153
(35,339)
79,814
184,873

Liabilities and stockholders' equity:

Short-term borrowings (bank)
Accounts payable
Other accrued liabilities
Total current liabilities
Long-term debt
Shareholders' equity
Total liabilities & stockholders' equity

29,002
12,315
24,608
65,926
10,000
34,391
110,317

37,160
12,806
26,330
76,296
10,000
38,967
125,263

73,089
11,890
25,081
110,060
10,000
41,856
161,916

84,981 105,868
13,370 15,365
21,318 24,516
119,669 145,750
18,200 18,200
47,004
50289
184,873 214,239

7,870
40,761
73,754
122,385
142,453
(50,599)
91,854
214,239

2003

9,050
46,875
84,817
140,743
169,753
(54,499)
115,254
255,996

139,704
17,670
28,193
185,567
18,200
52229
255,996

Exhibit TN7
STAR RIVER ELECTRONICS
Ratio Analyses of Historical and
Projected Financial Statements
(fiscal year ended June 30; all figures in percentages)
1998
(Actual)

1999
(Actual)

2000
(Actual)

2001
(Actual)

2002
(Proj'd)

Profitability
Operating Profit Margin (%)
Average Tax Rate (%)
Return on Sales (%)
Return on Equity (%)
Return on Assets (%)

18.6%
27.9%
8.0%
16.7%
5.2%

18.6%
26.1%
8.2%
16.9%
5.2%

15.6%
24.7%
5.3%
11.7%
3.0%

16.1%
22.6%
6.7%
15.2%
3.9%

14.3%
24.5%
4.3%
10.5%
2.5%

Debt/Equity Ratio (%)

Debt/Total Capital (%)
EBIT/Interest (x)

1.13
0.53
2.5

1.21
0.55
2.5

1.99
0.67
1.8

2.20
0.69
2.2

0.67
0.40
1.7

Asset Utilization
Sales/Assets
Sales Growth Rate (%)
Assets Growth Rate (%)
Days in Receivables
Payables to Cost of Goods Sold
Inventories to Cost of Goods Sold

65.2%
15.0%
8.0%
112.4
36.5%
69.1%

64.0%
11.4%
13.5%
115.6
33.4%
72.1%

0.76
0.41

0.77
0.41

Leverage

57.2%
15.6%
29.3%
110.7
25.6%
115.8%

57.4%
14.5%
14.2%
122.1
25.0%
119.3%

56.9%
15.0%
15.9%
122.0
25.0%
120.0%

Liquidity
Current Ratio
Quick Ratio

0.80
0.31

0.88
0.34

0.84
0.33

2003
(Proj'd)
13.1%
24.5%
2.8%
7.5%
1.5%

3.02
0.75
1.4

54.8%
15.0%
19.5%
122.0
25.0%
120.0%

0.76
0.30

Coupon
YTM
Time period
Current price:

5.75%
6.6%

97

1
Dec-02
2.875
2.78
97.00

2
Jun-01
2.875
2.69

3
Dec-02
2.875
2.61

4
Jun-01
2.875
2.52

5
Dec-02
2.875
2.44

6
Jun-01
2.875
2.37

7
Dec-02
2.875
2.29

8
Jun-01
102.875
79.29