Tuesday, Apr 25, 2006
MARC has affirmed Priceworth Wood Products Berhad’s (Priceworth) short and long term ratings of MARC-2/A respectively on its RM160.0 million Commercial Papers/Medium-Term Notes; reflecting the Group’s improving financials underpinned by growing timber extraction activity/contracting services coupled with expansion of its manufacturing facilities and better outlook of timber prices. The Group’s vulnerability to cyclical developments affecting the timber/wood-based industry remains a moderating factor to the ratings.
Priceworth’s principal activities are manufacturing and sale of processed wood products (including sawn timber, plywood, moulded timber, barecore board and timber flooring) and timber contracting services. Its integrated timber complexes are located on two sites; an 81-acre site in Kuala Seguntor (about 16 km from Sandakan) and on another 118.74-acre site in Batu Sapi (about 20 km from Sandakan) pursuant to the acquisitions of Sinora Sdn. Bhd. (SSB) and Innora Sdn. Bhd. (ISB) completed in June 2005. Around 85%-90% of the Group’s total sales are exported to international markets including Japan, China, Hong Kong, South Korea and the Philippines. Two of its subsidiaries, Cergas Kenari Sdn Bhd (CKSB) and Teras Selasih Sdn Bhd (TSSB), currently hold the rights to extract and trade timber logs in two concession areas within the Sandakan district in Sabah. While existing concessions are expected to sustain internal consumption for another two to three years based on current logs requirement, the Group is presently in negotiation with several parties linked to Yayasan Sabah/the Sabah State Government for new timber concessions/areas.
Through the acquisitions of SSB and ISB, the Group boasts a combined production output of 246,000 m3 annually. Moving forward, the Group’s annual plywood production capacity will be doubled to 130,000 m3 from 60,000 m3 presently. The Group is expected to perform better in view of the recovery in plywood prices amidst buoyant construction and housing activities particularly in the Middle-East, Japan, China and India. In addition, Priceworth’s foray into the property development business in Sandakan via its 51% subsidiary, Integral Acres Sdn. Bhd. (IASB) is projected to generate additional revenue of RM59.0 million per year on average between 2006 to 2010.
Priceworth’s revenue surged 74% to RM304.33 million for financial year ended 30 June 2005 on the back of increased exports to Japan and China as well as improvement in local sales accompanied with increased logging activities following the acquisitions of CKSB and TSSB. Sales of processed wood products remain the main contributor, accounting for 54% of the Group’s total revenue. This was followed by timber contracting fees which contributed 27% of total revenue. Going forward, revenue will also be driven by sales of plywood and sawn timber pursuant to the acquisitions of SSB and ISB. Cash flow protection measures remain adequate with CFO interest coverage and CFO debt coverage standing 5.26 times and 3.75 times respectively for financial year ended 30 June 2005, in spite of higher cost of financing incurred at RM3.22 million (FY2004: RM2.71 million).
Priceworth’s debt leverage, since its IPO in 2001, has remained modest with its debt-equity ratio averaging 0.48 times over the last 4 years. This, however, had increased to 1.06 times as at 31 December 2005, following the full drawdown of the RM160 million CP/MTN program as well as an additional RM10 million revolving credit facility. Nonetheless, Priceworth’s shareholders’ funds had also increased 272% since its IPO from RM47.24 million to RM175.90 million as at 31 December 2005.
Priceworth’s principal activities are manufacturing and sale of processed wood products (including sawn timber, plywood, moulded timber, barecore board and timber flooring) and timber contracting services. Its integrated timber complexes are located on two sites; an 81-acre site in Kuala Seguntor (about 16 km from Sandakan) and on another 118.74-acre site in Batu Sapi (about 20 km from Sandakan) pursuant to the acquisitions of Sinora Sdn. Bhd. (SSB) and Innora Sdn. Bhd. (ISB) completed in June 2005. Around 85%-90% of the Group’s total sales are exported to international markets including Japan, China, Hong Kong, South Korea and the Philippines. Two of its subsidiaries, Cergas Kenari Sdn Bhd (CKSB) and Teras Selasih Sdn Bhd (TSSB), currently hold the rights to extract and trade timber logs in two concession areas within the Sandakan district in Sabah. While existing concessions are expected to sustain internal consumption for another two to three years based on current logs requirement, the Group is presently in negotiation with several parties linked to Yayasan Sabah/the Sabah State Government for new timber concessions/areas.
Through the acquisitions of SSB and ISB, the Group boasts a combined production output of 246,000 m3 annually. Moving forward, the Group’s annual plywood production capacity will be doubled to 130,000 m3 from 60,000 m3 presently. The Group is expected to perform better in view of the recovery in plywood prices amidst buoyant construction and housing activities particularly in the Middle-East, Japan, China and India. In addition, Priceworth’s foray into the property development business in Sandakan via its 51% subsidiary, Integral Acres Sdn. Bhd. (IASB) is projected to generate additional revenue of RM59.0 million per year on average between 2006 to 2010.
Priceworth’s revenue surged 74% to RM304.33 million for financial year ended 30 June 2005 on the back of increased exports to Japan and China as well as improvement in local sales accompanied with increased logging activities following the acquisitions of CKSB and TSSB. Sales of processed wood products remain the main contributor, accounting for 54% of the Group’s total revenue. This was followed by timber contracting fees which contributed 27% of total revenue. Going forward, revenue will also be driven by sales of plywood and sawn timber pursuant to the acquisitions of SSB and ISB. Cash flow protection measures remain adequate with CFO interest coverage and CFO debt coverage standing 5.26 times and 3.75 times respectively for financial year ended 30 June 2005, in spite of higher cost of financing incurred at RM3.22 million (FY2004: RM2.71 million).
Priceworth’s debt leverage, since its IPO in 2001, has remained modest with its debt-equity ratio averaging 0.48 times over the last 4 years. This, however, had increased to 1.06 times as at 31 December 2005, following the full drawdown of the RM160 million CP/MTN program as well as an additional RM10 million revolving credit facility. Nonetheless, Priceworth’s shareholders’ funds had also increased 272% since its IPO from RM47.24 million to RM175.90 million as at 31 December 2005.