info as below
A key difference between Mieco and its domestic peers is the company is coming from a lower base and has more room to enhance its operations. Its peers are already producing high end products, with limited room for capacity and selling prices to rise further. In comparison, Mieco can still increase its output significantly and is also capable of eventually shifting to premium products for better margins.
It is noteworthy that Mieco mainly produces E2 and E1 grade particleboard while Heveaboard and Evergreen have switched to producing higher value E0 and super E0 categories. An industry official says Mieco is capable of producing E0 and super E0 boards but only lacks the necessary certification at the moment.
E0 and E0 boards command net margins of 20% to 22% versus 15% to 17% for E1 boards, and 12% to 14% for E2 boards.
The company’s German made machinery is able to produce more consistent product quality, which is an added advantage when shifting up to premium products.
That said, Mieco needs to regain the Japanese Industrial Standards certification for E0 and super E0 boards. The standards are used for industrial activities in Japan. The company lost the JIS rating in Aug 2016 and aims to regain it by 2019.
Recall that the company saw a new majority shareholder emerge in Oct 2016. Datuk Seri Ng Ah Chai bought a 56.76% stake from BRDB for RM107.27 million or 90 sen per share.
Ng, who is now Mieco’s MD, is also executive chairman and majority shareholder at SYR Res.
For FY2016 the company’s revenue fell 8.7% year on year to RM324.1 million while net profit quadrupled from RM18.6 million to RM82.7 million.
One of Ng’s immediate focus on his entry into Mieco was to manage its cost. The company’s two largest cost components are rubberwood and glue, which made up 32% and 30% of its cost of sales in FY2016. These figures have since fallen to 30% and 28% after it exercised more stringent control over raw material procurement.
While its longer term plan is to eventually shift into higher margin premium products, Mieco’s short term focus is to capitalize on a supply shortage in the E2 boards segment.
Only 20% of Mieco’s earnings are from the overseas market. Estimates that a weakening of 5% of the ringgit versus the USD would lift the company’s net profit by up to 2.2%.
In the longer term, Ng’s presence in both Mieco and SYFRes raises the possibility of a merger that would solidify the former’s position as Malaysia’s largest particleboard manufacturer.
Observers believe an acquisition could entail a potential amalgamation of SYFRes’s board division into Mieco that would allow the group to compete on a regional scale with the larger Thai particleboard manufacturers.
However the rising raw material and labor costs are major risks for Mieco, especially as rubberwood log prices have risen 10% year to date (14 April 2017). Furthermore, Mieco could be hurt if downstream manufacturers such as Pohuat, Liihen and JayCorp lower their selling prices to remain competitive.
Overall Streets expect the company to see a net profit CAGR of 56% between 2017 and 2019, as it utilization rate increases and production mix shifts to higher end products.
To observe
1. Datuk Seri Ng Ah Chai bought a 56.76% stake from BRDB for RM107.27 million or 90 sen per share. cost 90 cent now is 1.21 about 30% gain already.
2. if future can maintain a CAGR of 56%?
3. Mieco a small company can growth big compare to Hevea which already growth?
where u get this details?
ReplyDeleteCompare peer to peer, their products not much different in market, but always are fighting price, who can reduce cost, increase productivity, it may stand out from competitor.
information now is most cheap things. everywhere can find.
ReplyDeletetherefore,need to bet who is the winner and earn from it.