Wednesday, May 04, 2005
The rating reflects Priceworth Wood Products Berhad (Priceworth) Group’s improving financials underpinned by growing timber extraction activity/contracting services coupled with high operational integration pertaining to its manufacturing activities. The Group’s vulnerability to cyclical developments affecting the timber/wood-based industry remains a moderating factor to the rating.
Promoted to the main board of Bursa Malaysia in November 2004, Priceworth’s principal activities are manufacturing and sale of processed wood products (including sawn timber, barecore board, moulded timber and timber flooring) and timber contracting services. Its integrated timber complex is located at an 81-acre site in Kuala Seguntor, about 16 km from Sandakan, Sabah. Around 85%-90% of its total sales are exported to international markets including, among others, Japan, China, Hong Kong, South Korea and the Philippines.
To mitigate supply risk and ensure a constant and reliable supply of logs as raw materials for its downstream activities, Priceworth acquired Teras Selasih Sdn Bhd (TSSB) and Cergas Kenari Sdn Bhd (CKSB) in November 2004. CKSB holds the rights to extract timber logs in three concession areas of approximately 38,550 ha within the Sandakan district in Sabah whereas TSSB is principally involved in the trading of timber logs from the said concession areas.
Other than the synergistic effects, post acquisitions, the Group will secure a supply of approximately 418,000 cubic metres of logs p.a. or 2.09 million cubic metres, which is more than sufficient to meet its current requirement of 300,000 cubic metres p.a. Consequently, the Group plans to gradually increase its production capacity to process 400,000 cubic metres p.a. by upgrading its facilities, purchasing new machinery and increasing its production shifts.
Priceworth’s group revenue rose by 39% to RM175.13 million in fiscal year 30 June 2004. However, the group’s operating profit margin declined from 14% to 6% as rising raw material and selling costs and higher depreciation charges outpaced increases in the price of its manufactured products. Group debt leverage remains manageable at 0.53 times, aided by growing profit retention over the past several years. Cashflow has improved and is expected to be boosted by contributions from the acquired companies.
Promoted to the main board of Bursa Malaysia in November 2004, Priceworth’s principal activities are manufacturing and sale of processed wood products (including sawn timber, barecore board, moulded timber and timber flooring) and timber contracting services. Its integrated timber complex is located at an 81-acre site in Kuala Seguntor, about 16 km from Sandakan, Sabah. Around 85%-90% of its total sales are exported to international markets including, among others, Japan, China, Hong Kong, South Korea and the Philippines.
To mitigate supply risk and ensure a constant and reliable supply of logs as raw materials for its downstream activities, Priceworth acquired Teras Selasih Sdn Bhd (TSSB) and Cergas Kenari Sdn Bhd (CKSB) in November 2004. CKSB holds the rights to extract timber logs in three concession areas of approximately 38,550 ha within the Sandakan district in Sabah whereas TSSB is principally involved in the trading of timber logs from the said concession areas.
Other than the synergistic effects, post acquisitions, the Group will secure a supply of approximately 418,000 cubic metres of logs p.a. or 2.09 million cubic metres, which is more than sufficient to meet its current requirement of 300,000 cubic metres p.a. Consequently, the Group plans to gradually increase its production capacity to process 400,000 cubic metres p.a. by upgrading its facilities, purchasing new machinery and increasing its production shifts.
Priceworth’s group revenue rose by 39% to RM175.13 million in fiscal year 30 June 2004. However, the group’s operating profit margin declined from 14% to 6% as rising raw material and selling costs and higher depreciation charges outpaced increases in the price of its manufactured products. Group debt leverage remains manageable at 0.53 times, aided by growing profit retention over the past several years. Cashflow has improved and is expected to be boosted by contributions from the acquired companies.