MIECO Chipboard Bhd is confident of achieving a quantum-leap growth in profits and revenue this year, thanks to its strategic internal reorganisation exercise and new particleboard plant in Kechau Tui, Pahang.
Executive director Datuk Yong Seng Yeow said Mieco was heading towards exciting times.
”Its whole business profile will change by early next month with operations streamlined and better focused, thereby creating a better platform for future growth for the group. This will manifest in better focus on managing the intense global competition in the industry,” he told StarBiz in an interview in Kuala Lumpur.
He said the internal reorganisation exercise involved the transfer of Mieco's manufacturing operations in Semambu and Gebeng plants near Kuantan to wholly-owned subsidiary Mieco Marketing Sdn Bhd (MMSB).
This, coupled with MMSB's over RM300mil Kechau Tui plant which would be operational next month, would create a stronger platform for the group's future growth, he said.
“For this year I think we will show a stronger set of results,” he said.
Mieco registered a compounded annual growth rate of about 10% in revenue and about 8% in pre-tax profit over the past five years (see chart).
“That says a lot in these trying times in terms of the economic and geopolitical conditions,” Yong said, adding that Mieco's total net assets had grown to RM347mil last year from RM298mil in 2000.
Going forward, Yong said Mieco's vision to be Asia-Pacific's leading wood panel player specialising in particleboards was fast becoming a reality.
The third plant in Kechau Tui would be the single largest particleboard plant in Asia-Pacific with a built-in capacity of 2,000 cubic metres (cu m) per day.
“We are very excited. The new plant with an installed production capacity of 640,000 cu m per year will also further reinforce our position as Malaysia's largest particleboard maker,” he said.
The two existing plants in Semambu and Gebeng produce 300,000 cu m of particleboards annually. Yong expects Mieco's production to increase to 940,000 cu m by 2008.
Since the first Semambu plant began operations in 1974, Yong said, Mieco, a manufacturing arm of public listed Bandar Raya Developments Bhd, which owns 56.2%, had invested over RM600mil in its particleboard ventures in Malaysia.
“With the expanded capacity in place, Mieco is positioning to be a dominant player in Asia-Pacific whereby a majority of our products will be exported to cater for the increasing demand.”
Mieco is believed to be one of the two largest particleboard manufacturers in Asia-Pacific, apart from the Vanachai group of Thailand.
Having secured a dominant presence in the domestic market, Mieco started exporting since 1995 to major importers of particleboards like China, Taiwan, Japan, South Korea, Hong Kong, South-East Asia, Australasian countries, Indian subcontinents, the Middle East and Africa.
Going forward, Yong said, demand for particleboards looked good with a bright future.
The Asia-Pacific market, for example, has been importing between 4 million and 5 million cu m over the past few years, with Malaysia importing close to one million cu m yearly.
Referring to challenges ahead, Yong said Asia-Pacific's overall demand for particleboards would still be on the uptrend with an 8% to 10% annual growth. “Intense competition will come from increased production from players in Thailand and China,” he said.
Apart from the strong manufacturing capacity to counter such competition, Yong said, Mieco had been focusing its efforts through strengthening its established corporate brand, expanding distribution base, good range of quality products and sound customer relationship management.
“In anticipation of economic expansion in China, Mieco set up a representative office in Guangzhou in 1999 as well as a regional office in Hong Kong in 2000,” he added.
On the weak US dollar impact on the business, Yong said: “Mieco is reviewing the necessity to adjust the export selling price to other currencies in view that the ringgit may be re-pegged. We are keeping a close watch.”
Yong said wood resources were crucial ingredients to companies like Mieco and the Government must provide more inputs into forestry management to ensure ample wood supply to support the industry.
He added that Malaysia was well poised to be a world player in the supply of consistent and high quality office and home furniture.
Yong said the Government's effort via the Malaysian Industrial Development Authority, Malaysian External Trade Development Corporation as well as timber and furniture promotion councils had created a positive impact on the Malaysian brand. (See also page 3)
mokooi (2005-3-10 15:45:49)
Monday February 21, 2005
Strategic planning, sound marketing key to success of Mieco Chipboard
BY HANIM ADNAN
THE success of Mieco Chipboard Bhd as Malaysia's leader and pioneer in the particleboard industry lies in its strategic business planning and sound marketing procedures that are well ahead of its closest competitors.
Executive director Datuk Yong Seng Yeow said the plan for the group's third particleboard plant near Kuala Lipis which would start operations next month had been mapped out for quite some time.
Although the group planned to aggressively increase its market share regionally, he said, Mieco would continue to be prudent in its expansion programme, given the highly capital-intensive nature of the particleboard industry.
“Our plan must follow closely with the overall particleboard demand pattern, especially in Mieco's major markets in Asia-Pacific, and must be well supported by effective marketing strategies,” Yong explained.
In the past, Yong said, Asia-Pacific had been a net importer of particleboards with the excess volume supplied by European and South American manufacturers.
“Realising this opportunity, many South-East Asian (SEA) manufacturers from Thailand and Malaysia, including Mieco, have embarked on a strong expansion, particularly last year, to meet the increasing demand,” he added.
However, despite the increased volume by the two SEA players, Yong said, the supply was still insufficient to meet the demand from major particleboard importers like China, South Korea, Japan, India, the Middle East and SEA countries.
”Mieco's marketing strategies are to expand coverage in both existing and new export regions as well as expand the business with the current group of customers by introducing new products,” Yong said.
Another positive development is that particleboards are becoming increasingly favoured by green environment lobbyists who are against the use of solid timber, plywood and medium-density fibreboards, which consume a high proportion of solid logs.
For particleboards, the raw materials are derived from wood shavings, off cuts, wood slabs and twigs, which are normally disposed of or incinerated by timber factories and log yards.
“This favours a potentially higher usage of particleboards in the long term,” Yong added.
He pointed out that generally, there had been a switch from the usage of plywood to particleboard mainly because of the big price difference, the number of product substitutions that had taken place in view of technology innovation and designs, and the green environment concerns.
Meanwhile, Yong said that at the upcoming Malaysian International Furniture Fair 2005 (MIFF) to be held next month, Mieco would launch two new product ranges and add a new colour range from an existing product line.
The products will include Mieco Decorative Electron-beam Foil Chipboard, Mieco Decorative Polymer Faced Chipboard and the Melamine Faced Chipboard Millennium Collection 2005 series.
“The Malaysian Government has been very supportive of the wood-based industry and the rest is up to the individual manufacturers to capitalise on the support provided,” Yong said.
Another Mieco project in the pipeline will be the commercial production of kenaf fibreboard early this year, a joint venture project with the Matsushita Electric Works Co., Japan.
Kenaf is a plant from the hibiscus family, which has vast potential as an alternative raw material to rubber and acacia wood for the wood-based industry.
“The project so far is progressing well and we expect the plant's capacity to be fully taken up by year-end,” Yong said, adding that the Malaysian Government had taken a personal interest in the project to ensure there was enough supply of kenaf plantations to support the industry.
To date, state governments have cultivated kenaf in Terengganu, Pahang and Sabah. Mieco currently imports kenaf from Myanmar as raw material for its initial production.
Yong said the commercial cultivation of kenaf would eventually result in extra revenue for Malaysia in terms of foreign exchange, and the wood-based industry would find better use of kenaf other than the rubber and acacia wood.
Rush15 (2005-3-16 18:08:00)
在 LC 有买. 现实没买.
mokooi (2005-3-31 17:19:21)
Mieco set to lead as Asia-Pacific's wood panel player
21 February, 2005
Mieco Chipboard Bhd's vision to be Asia-Pacific's leading wood panel player specialising in particleboards is fast becoming a reality.
It is confident of doing so, thanks to its strategic internal reorganisation exercise and new particleboard plant in Kechau Tui, Pahang.
Meico's over RM300 million Kechau Tui plant would be operational next month. It would be the single largest particleboard plant in Asia-Pacific with a built-in capacity of 2,000 cubic metres (cu m) per day.
"The new plant with an installed production capacity of 640,000 cu m per year will also further reinforce our position as Malaysia's largest particleboard maker," Executive Director Datuk Yong Seng Yeow said.
The two existing plants in Semambu and Gebeng produce 300,000 cu m of particleboards annually. Yong expects Mieco's production to increase to 940,000 cu m by 2008.
Since the first Semambu plant began operations in 1974, Yong said, Mieco, had invested over RM600 million in its particleboard ventures in Malaysia.
“With the expanded capacity in place, Mieco is positioning to be a dominant player in Asia-Pacific whereby a majority of our products will be exported.”
Mieco is believed to be one of the two largest particleboard manufacturers in Asia-Pacific, apart from the Vanachai group of Thailand.
Having secured a dominant presence in the domestic market, Mieco started exporting since 1995 to major importers of particleboards like China, Taiwan, Japan, South Korea, Hong Kong, South-East Asia, Australasian countries, Indian subcontinents, the Middle East and Africa.
Yong said demand for particleboards looked good. The Asia-Pacific market, for example, has been importing between 4 million and 5 million cu m over the past few years, with Malaysia importing close to one million cu m yearly.
Yong said Asia-Pacific's overall demand for particleboards would still be on the uptrend with an 8% to 10% annual growth. “In anticipation of economic expansion in China, Mieco set up a representative office in Guangzhou in 1999 as well as a regional office in Hong Kong in 2000.”
He added that Malaysia was well poised to be a world player in the supply of consistent and high quality office and home furniture.
Yong said the Government's effort via the Malaysian Industrial Development Authority, Malaysian External Trade Development Corporation as well as timber and furniture promotion councils had created a positive impact on the Malaysian brand.
Adapted from "Business Times", 21 February, 2005
mokooi (2005-4-04 16:23:55)
South East Asia
Features
Mieco keeps on growing
09 February 2005
One of the largest particleboard producers in the Asia-Pacific region just got bigger. We visited Mieco's latest factory in Kuala Lipis as it was adding the finishing touches to this major new project
Mieco Chipboard is a name that is very well known in the Asian panel industry, both for raw particleboard (chipboard) production and for its extensive value-adding facilities, having launched its first production line in 1976.
The company in fact has two established particleboard mills, both in Kuantan in Pahang state on the east coast of peninsula Malaysia. One line is at Semambu and the other at Gebeng.
The combined capacity of these two lines is over 280,000m3 a year on one Siempelkamp continuous ContiRoll press and one Dieffenbacher single-opening one.
Mieco is owned 56% by Bandaraya Development Bhd, while 44% is publicly owned, with a listing on the Kuala Lumpur stock exchange in 1998.
The company's latest project is situated on a greenfield site in Kuala Lipis in the northern part of the Malaysian peninsula, 270km north of the capital, Kuala Lumpur, for reasons which soon become obvious, given concerns about material supply in the peninsula.
"Our nearest competitor is Robin Resources in Mentakab in terms of wood raw material and we have 11 sawmills around here and a number of rubberwood plantations," said Dato' Yong Seng Yeow, executive director of Mieco Chipboard Berhad. "We are also close to Gua Musang and there are huge forests there of medium hardwood, rubberwood and acacia, 90 minutes from the factory.
"We don't depend much on logs, but use sawmill residues, shavings and sawdust – logs only comprise about 15-20% in the form of branches and thinnings.
"We have no worries about wood supply here. We considered building the new line in China, Vietnam or elsewhere, but decided on Kuala Lipis because of the wood supply," confirmed Dato' Yong.
State encouragement
Pahang state is also encouraging the development of a wood products industry and Mieco is the first company to take advantage of that.
Acacia may be a good wood for panel production, but its stringy bark is a problem for conventional debarkers and Mieco is of course aware of that.
"A Brazilian company has developed a debarker which can cope with acacia and a couple of mills are already using it successfully, so we will be buying one of those," said the executive director.
Raw material supply is particularly relevant for Mieco's latest project where the initial output will be 1,500m3 per day and will reach 2,000m3 a day later.
Vanachai of Thailand still holds the crown of the biggest capacity manufacturer of the product in the Asia-Pacific, at just under one million m3 annually, but Mieco is obviously a major regional player.
At the time of my visit in early December, the 50-acre site was being treated to one of those continual rainstorms that only the rainy season here can offer and areas of water were seen on the open expanses of the site.
However, inside the buildings, the new line was nearing completion, with technicians adding the finishing touches.
A conveyor system takes the wood from the woodyard to the Pallmann 1,000kW drum chipper, which has a capacity of 90 tons per hour. Logs and slabs are fed separately, passing an Elmed metal detector on the way.
The chipping area has stringent environmental controls imposed by the local authority, including sound barriers.
From the chipper, there is a covered conveyor to the wet chip bin with a moving floor.
Next come two Dynascreens from Pal of Italy, one for surface and one for core layer material. There are eight Pallmann flakers.
The Schenkmann & Piel drum dryer is 7m in diameter and 34m long and has a capacity of 64 tons of water evaporation per hour. This is followed by three Pal Superscreens and four sifters (two each for core and surface layers).
Three Pallmann refiners re-process oversize material.
The glue system was supplied by Imal of Italy using the flow meter concept and the focus of this mill will be on UF glue to E1 standard. The group recently started producing to the Japanese F**** formaldehyde emissions standard at its other mills.
Careful forming is important to Mieco as a large part of its customer base is in speaker manufacture, where a fine surface is particularly prized. Thus the former is a four-head unit by Dieffenbacher, with two heads each for surface and core.
The CPS press is 41.6m long, extendable to 60m, and has the latest flexible infeed system. It is equipped with Berndorf Band 2.3mm stainless steel belts. Mieco opted for the full service package from Dieffenbacher with 24-hour online system with video cameras, coordinated through the supplier's new office in Kuala Lumpur, where engineers and electricians have been on call from early this year.
The latest Satos sander by Steinemann has eight conventional heads and a cross-head unit.
"This is the latest and the first of its kind in Asia," said Mr Ngai Kwai, general manager of the new factory.
The cut-to-size system is also part of the Dieffenbacher package.
Many people in the industry are concerned about the additional particleboard capacity which has been added in the last 12 months or so, with Vanachai, Metro, Green Panel and Rayong building new continuous lines in Thailand, plus the rebirth of STA's two lines as Hat Yai Panel in the same country. Now there is Mieco at Kuala Lipis. The question is, where will it all go?
"We are aiming at exporting 60 to 65% of our combined capacity, with the balance going to domestic furniture and speaker box makers," said Dato' Yong. "China will account for around 30% of capacity, with the rest going to about 20 other countries. China is a strong market for speaker boxes in 9mm and 12mm board," he said.
"One of the other good things about this site is the rail transportation six kilometres away as a cheap source of transport to Port Kelang and PPT at Johor Bahru."
Future expansion
But this is not the end of the expansion plans of Mieco Chipboard Sdn Bhd.
"Once this line is running well, we will look at other possibilities expanding on our core competency – wood based panels. Possibly we will build MDF capacity," said the executive director.
"We are fortunate to have our strategic alliance with [particleboard and MDF manufacturer] Kunz of Germany which has a lot of experience. The company has assisted us technically with this plant."
Currently there is no value-adding at Kuala Lipis, but electron beam-cured paper and foil lines are planned for this year.
The company's other mills offer short-cycle pressing and direct postforming facilities and make worktops and laminate flooring. They also have Vits paper impregnation lines.
These mills also offer cut-to-size, drilling, edge-grooving and edge-banding to provide semi-finished components to its furniture making customers, as well as a range of DIY furniture under the 'Livin Style' brand.
"Panel makers are moving more downstream but we do not compete with our customers," said Dato' Yong.
However, with a total capacity of around 920,000m3 a year once the Kuala Lipis press is at full capacity, his company will certainly compete with the other Asia-Pacific particleboard producers.
以前，我曾经也有做一些功课关于mieco。
从Balance Sheet看中，
短期流动资产（以2004年尾跟2003年尾比较）：
inventory ：36.8mil 25.1mil
trade receivable ： 27.5mil 25.0mil
因为inventory可以增加主要原因是产生线也增加，所用到原料也逐渐增加包括 raw material，finished good，packing material 及 consumeable stores.
Inventory 意义是包括 raw material，finished good，packing material 及 consumeable stores.
这可以理解及不必担心.
短期负债 （以2004年尾跟2003年尾比较）：
短期负债 ： 25.1mil 0
为什么要借贷？
来自 Commercial Paper (unsecured) RM25 million
目的就是要兴建新厂...
这可以理解及不必担心只要公司能够在未来几年成长.
长期负债 ：150mil
i)RM175 million Al Murabahah Commercial Papers / Medium Term Notes 2003/2008 (“MCP / MMTN”) Programme
The Company has fully utilised the said proceeds of RM175 million MCP / MMTN to finance its new plant and for working capital purposes.
剩余的1亿5千万令吉则是透过发售回教债券的方式取得资金。
这点可以从 Cash flows from financing activities可以看出来
Net finance cost of RM7.3 million
此外，公司也得到RM14.5 million 从 100 million Warrants 2004/2009 for working capital purposes.
＂With effect from 2004, the Group has revised the annual depreciation rate of plant and machinery from 7.5% to 5% to better reflect the useful life of these assets. Had the Group applied the previous rate of 7.5%, the Group depreciation charge for the financial year would have been higher by RM7.4 million.＂
这点需要注意，可以能提高未来公司的盈利............
Quarter on Quarter review
Group revenue increased from RM44.3 million to RM64.1 million in the fourth quarter of 2004 mainly due to higher selling prices and increase in export sales volume.Group profit before exceptional item increased by RM5.8 million to RM10.1 million in this quarter against RM4.3 million in the same quarter of 2003 as a result of improved sales, lower depreciation expenses and higher production volume though partially affected by increase in raw material cost.
Year on Year review
Group revenue increased from RM182.3 million in 2003 to RM236.7 million for 2004 mainly due to higher selling prices and stronger export sales volume for chipboards and related products. Group profit before exceptional item increased by RM9.1 million due mainly to favourable sales, lower depreciation expenses, higher production volume and efficient use of raw materials. The results were partially reduced by increase in raw material costs and lower interest income.
MIECO Chipboard Bhd is confident of achieving a quantum-leap growth in profits and revenue this year, thanks to its strategic internal reorganisation exercise and new particleboard plant in Kechau Tui, Pahang.
Executive director Datuk Yong Seng Yeow said Mieco was heading towards exciting times.
¡¨Its whole business profile will change by early next month with operations streamlined and better focused, thereby creating a better platform for future growth for the group. This will manifest in better focus on managing the intense global competition in the industry,¡¨ he told StarBiz in an interview in Kuala Lumpur.
He said the internal reorganisation exercise involved the transfer of Mieco's manufacturing operations in Semambu and Gebeng plants near Kuantan to wholly-owned subsidiary Mieco Marketing Sdn Bhd (MMSB).
This, coupled with MMSB's over RM300mil Kechau Tui plant which would be operational next month, would create a stronger platform for the group's future growth, he said.
¡§For this year I think we will show a stronger set of results,¡¨ he said.
Mieco registered a compounded annual growth rate of about 10% in revenue and about 8% in pre-tax profit over the past five years (see chart).
¡§That says a lot in these trying times in terms of the economic and geopolitical conditions,¡¨ Yong said, adding that Mieco's total net assets had grown to RM347mil last year from RM298mil in 2000.
Going forward, Yong said Mieco's vision to be Asia-Pacific's leading wood panel player specialising in particleboards was fast becoming a reality.
The third plant in Kechau Tui would be the single largest particleboard plant in Asia-Pacific with a built-in capacity of 2,000 cubic metres (cu m) per day.
¡§We are very excited. The new plant with an installed production capacity of 640,000 cu m per year will also further reinforce our position as Malaysia's largest particleboard maker,¡¨ he said.
The two existing plants in Semambu and Gebeng produce 300,000 cu m of particleboards annually. Yong expects Mieco's production to increase to 940,000 cu m by 2008.
Since the first Semambu plant began operations in 1974, Yong said, Mieco, a manufacturing arm of public listed Bandar Raya Developments Bhd, which owns 56.2%, had invested over RM600mil in its particleboard ventures in Malaysia.
¡§With the expanded capacity in place, Mieco is positioning to be a dominant player in Asia-Pacific whereby a majority of our products will be exported to cater for the increasing demand.¡¨
Mieco is believed to be one of the two largest particleboard manufacturers in Asia-Pacific, apart from the Vanachai group of Thailand.
Having secured a dominant presence in the domestic market, Mieco started exporting since 1995 to major importers of particleboards like China, Taiwan, Japan, South Korea, Hong Kong, South-East Asia, Australasian countries, Indian subcontinents, the Middle East and Africa.
Going forward, Yong said, demand for particleboards looked good with a bright future.
The Asia-Pacific market, for example, has been importing between 4 million and 5 million cu m over the past few years, with Malaysia importing close to one million cu m yearly.
Referring to challenges ahead, Yong said Asia-Pacific's overall demand for particleboards would still be on the uptrend with an 8% to 10% annual growth. ¡§Intense competition will come from increased production from players in Thailand and China,¡¨ he said.
Apart from the strong manufacturing capacity to counter such competition, Yong said, Mieco had been focusing its efforts through strengthening its established corporate brand, expanding distribution base, good range of quality products and sound customer relationship management.
¡§In anticipation of economic expansion in China, Mieco set up a representative office in Guangzhou in 1999 as well as a regional office in Hong Kong in 2000,¡¨ he added.
On the weak US dollar impact on the business, Yong said: ¡§Mieco is reviewing the necessity to adjust the export selling price to other currencies in view that the ringgit may be re-pegged. We are keeping a close watch.¡¨
Yong said wood resources were crucial ingredients to companies like Mieco and the Government must provide more inputs into forestry management to ensure ample wood supply to support the industry.
He added that Malaysia was well poised to be a world player in the supply of consistent and high quality office and home furniture.
Yong said the Government's effort via the Malaysian Industrial Development Authority, Malaysian External Trade Development Corporation as well as timber and furniture promotion councils had created a positive impact on the Malaysian brand.
Principal activities:Chipboard manufacturer.
Major shareholder/s:Bandar Raya Developments Bhd.
Financial highlights (RM mln) – 31 December (click to view)
For the new subscribers to i Capital or icapital.biz who may not be familiar with Mieco Chipboard Berhad (Mieco), we quickly recapitulate the business of Mieco. It was set up as far back as the Seventies but was only listed on Bursa Malaysia Securities Berhad in 1998, around the depths of the Great Asian Crisis. Mieco is a manufacturer of particleboard or chipboard and set up its first production line in 1976, making it a pioneer. The first factory is located in Semambu, Kuantan with its second factory located nearby in Gebeng. The two factories have a production capacity of more than 280,000 cubic meters per annum.
With the group’s capacity running at full utilisation, Mieco announced a major expansion in 2003 by adding a third factory in Kuala Lipis, Pahang. This state-of-the-art production line 4 will triple the group’s capacity at an investment cost of RM300 mln. In order to ensure success of the project, Mieco’s technical partner, KUNZ GmbH of Germany, will provide ongoing consultancy assistance. The new line will have a production capacity of more than 2,000 cubic meters a day or 640,000 cubic meters per annum and is on schedule to be operational by early 2005. The new line will emerge as the single largest chipboard plant in Asia. By increasing the group’s daily production capacity from 900 cubic meters to around 3,000 cubic meters, MIECO will become one of the largest chipboard producers in Asia. Vanachai Public Co Ltd of Thailand, Mieco’s regional competitor, is believed to have a slightly larger capacity than Mieco. The cost of production for Malaysia and Thailand are rather similar. The new plant enjoys a 15-year tax-free status.
Mieco’s particleboards can be generally grouped as plain and value-added with the current mix about equally split between the two. Presently, the decorative melamine face chipboard contributes the most to the group’s turnover and fetch higher margins than the plain boards. But output of the new plant will be geared more towards the plain boards and a new paper laminated board. Growth for the melamine board is maturing but the paper laminated board offers vast potential. In terms of margins, the paper laminated board is in-between the plain and the melamine face boards.
The group uses mainly rubber wood slabs combined with rubber wood logs/branches and shavings as the main raw material and some acacia. With the new Kuala Lipis plant, Mieco plans to increase the consumption of the residues, which are cheaper in price. However, the biggest cost item is resin, making up about one-third of production cost. The resin is methanol based and with the rise in crude oil prices, resin prices have been rising as well. Wages are not a major cost item as the operations are capital intensive. The new plant will add 165 workers to the current workforce of around 160. The RM300 mln investment will see a major rise in depreciation charges. To mitigate this non-cash item, Mieco has recently revised its depreciation rate for plant and machinery downwards to 5% from 7.5% effective 2004. While accountants may quarrel with this change, the new depreciation rate would appear to be more in line with the economic life of the plant and machinery. After all, the first production line, set up 28 years ago, is still running and fully utilised.
Demand for particleboard in the Asia-Pacific region and locally is strong. Malaysia is currently a net importer of particleboard. Even though the new plant in Kuala Lipis will triple Mieco’s production capacity, the group’s enlarged capacity is expected to be fully utilised by 2007/2008. When the new plant is operating, Mieco expects to sell 30% of the enlarged output locally, 30% to China, 35% to the rest for the world and the balance 5% being value added products. Mieco has a strong presence in the local market and started exporting in 1995 to China, Taiwan, Japan, Korea, Hong Kong, ASEAN, India, the Middle East, etc. In recognition of the vast potential in China, Mieco set up a representative office in Guangzhou, China and a regional office in Hong Kong in 1999 and 2000 respectively.
Recently, Mieco announced a joint venture with Matsushita Electric Works Ltd, Japan (MEW) to set up the world’s first commercial production of Kenaf fibreboards. MEW will hold 51% of the company and commercial production is expected in 2005 at its Kuantan plant. As all the production will be sold to Matsushita on a cost-plus basis, the joint venture is expected to be profitable from the first year of operations, which will also be tax-free. Total investment for this expansion will be RM20 mln. The Kenaf plant is fast growing and can be harvested twice a year. Like the current particleboards, the Kenaf boards can be used in the automobile, furniture and other industries. However, the Kenaf boards can be made to as thin as 1 mm, as opposed to 6 mm for the rubber wood boards.
Conclusion and Advice
After the Lipis plant, no huge capital expenditure is expected from Mieco. At a price of RM2.36 and RM1.09 for its warrants, Mieco is capitalised at just over RM600 mln. With its expansion underway, the book value and level of sales would not be useful yardsticks. What we think is more relevant is to value Mieco based on its normalised level of expanded operations. What would this be ?
First, one has to bear in mind that the main factor driving Mieco in the coming years would be regional growth, especially China, which is more attractive than just local growth. Secondly, as i Capital expects China’s economy to do marvellously well in the coming decade, a well-managed exposure to China, either direct or indirect, can be exciting and probably very rewarding. Thirdly, Mieco is expected to fully utilise its enlarged capacity by 2007. With expected sales of around RM600 mln in the medium-term, this would imply a normalised earning power of around RM90 mln. Capitalised this at 7% would give us a value of RM4.14 per Mieco share or a 43% discount. In addition, with an expected dividend yield of around 4%, i Capital rates Mieco Chipboard as a longer term Buy.
For those who love warrants, Mieco has warrants that can be converted on a 1 for 1 basis at RM1.20 per share from Apr 2006 to Apr 2009. Proceeds from the warrants are expected to be used to repay its long-term loans. However, even though Mieco has long-term borrowings of RM149.6 mln, it also has cash of more than RM182 mln and strong cash flow.
Disclosure of interests (required under the Securities Industry Act) :
The publisher and associates have an interest in Mieco Chipboard.
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