GW Plastics, which was previously known as Great Wall Plastic Industries Bhd when it was first listed on the local bourse in 1995, is making a come back to Bursa after it transferred its listing status to property developer, Encorp Bhd in 2003.
Lim Kok Boon ... ‘We aim to venture into the American, African and Russian markets.’
The company was previously wholly-owned by Encorp but it was sold by the latter in two tranches in 2004 and 2006. The company is now 51% owned by Megastart Sdn Bhd and 49% by Keybumi Sdn Bhd.
Following the initial public offering (IPO) exercise, Megastart will own 30.7% of GW Plastics and Keybumi 25.6%.
Megastart is 30% owned by GW Plastics chief executive officer cum executive director Lim Kok Boon and 70% by Yeoh Soo Ann, who is the non-independent non-executive director of GW Plastics and group chief executive officer of Encorp.
Lim hopes the listing will help raise the company’s profile, especially because it plans to expand its export market.
“We aim to venture into the American, African and Russian markets. We have started to tap into China by targeting multinational companies,” he tells StarBizWeek.
He says the overseas market contributed 51.8% to GW Plastics’ revenue in the financial year ended Dec 31, 2009 (FY09), with Japan as the largest contributor (16.6%), followed by Singapore (10.4%), South Korea (6.6%), Australia and New Zealand (6.1%) and Denmark (3.1%).
The company plans to explore new markets, particularly developed countries, as they offer better margins while expanding existing operations in certain overseas markets.
“Developed countries require high-quality products, hence, they provide better margins (for our business),” he says, attributing that to the change in consumption patterns due to rising urbanisation and income, which is driving demand for high value-added functional packaging such as ready-to-eat pre-processed food, smaller portions and re-sealable flexible packs.
Lim says global demand for flexible plastic packaging is expected rise by an average 3.5% a year, particularly in Asia, Latin America, Eastern Europe, Africa and the Middle East.
To meet increasing orders, GW Plastics is also expanding its production facilities via the purchase of new machinery and construction of a new factory block at its existing Rawang premises. The exercise is estimated to cost about RM37.2mil. “Our existing facilities are now operating at full capacity due to strong demand from both local and overseas markets,” he says.
He says the expansion will be financed in part by the IPO proceeds as well as internally-generated funds and borrowings.
The company started out in 1971 making plastic packaging products such as shopping bags and plastic sheets for general household and consumer use.
It later expanded into manufacturing high-quality flexible plastic packaging films with value-added printing and bag conversion process.
The blown and cast films producer serves a wide clientele in a variety of industries, including food and beverage, logistics, industrial, household products, pharmaceutical, construction, retail, agriculture, petrochemical and medical.
Clients include Nippon Kompo Shizai, ExxonMobil Chemical, Nozoe Industry Inc, ABC Tissues Products, Gardenia, President Bakery, and Malayan Sugar Manufacturing.
GW Plastics posted a profit after tax of RM15.3mil for FY09 on RM255.5mil revenue.
Lim says the blown film business contributed 66.6% to the company’s revenue in FY09, while cast film contributed the remainder.
He says the company’s market share in the local flexible plastic packaging industry, in terms of sales, last year stood at 5.1%.
The price of resin, which constitutes the company’s main cost component, is expected to fall over the next six months due to over-supply as a result of rebuilt capacities in Asia and new ones in the Middle East coming on-stream with substantially lower feedstock cost advantage.
“Resin price is about US$1,300 per tonne now compared with US$2,000 in August 2008. The price plunged to its lowest point in December 2008 due to the global financial crisis,” he says.
Even so, between the fourth quarter of 2009 and second quarter this year, resin prices have remained firm due to delays in new capacities coming on stream.
GW Plastics’ IPO involves a public issue of 16 million new shares, and an offer-for-sale of 45.42 million vendor shares at an issue/offer price of 76 sen each.
The company plans to raise RM12.2mil from the IPO, of which RM9mil will be allocated for the building of the new factory block, RM1mil for working capital, and the balance RM2.2mil to defray listing expenses.
IPO TRACKER
By LEE KIAN SEONG
lks@thestar.com.my
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