Timber-based Minho's Klang landbank lures interest


PETALING JAYA: Timber stocks are not in vogue currently. But Minho (M) Bhd, primarily a manufacturer and exporter of timber products, has been generating a lot of investor interest for its land bank in Klang.

The share price of the low-profile company has been moving up, gaining 83% year-todate, outperforming the stock market’s benchmark index, which is down over the same period. 

While the company’s mainstay is in timber products, what is more interesting is its 100 acres in Klang, mostly in the prime commercial area in Kapar.

According to Minho’s annual report, at last revaluation, the 100-acre land is worth more than RM120mil. Notably, the group’s current market capitalisation is about RM160mil.

Minho’s 100-acre landbank excludes its factory with storage shed, office and workshop which are situated on 145 acres of leasehold land.

That leasehold expires in October 2045. Most of Minho’s land parcels have not been revalued since 2009, with one parcel last revalued in 1999, suggesting that they could be worth a lot more today.

At the company’s current stock price of RM1.46, it is trading at a hefty 52% discount to 
its net tangible assets, which as of its latest quarter amounted to RM3.03 per share. 

Minho is a Klang-based company. It is involved in kiln drying and chemical preservative treatment, manufacturing and exporting moulded timber and related products, trading in logs supply and timber products, the operations of a fully-integrated timber complex, manufacturing and distributing industrial paper bags, property development as well as plantations.

In its annual report, the company said that with the prolonged uncertain economic outlook in Europe coupled with currency volatility, demand for its timber products from the European Union (a major market for Minho) is likely to remain lacklustre.

“The group aims to mitigate the above with not only more efficient operations and cautious marketing strategies, but also with higher timber extraction activities.”

It also hinted to shareholders in the report that its property segment, which saw the launch of a new residential project in Meru in the third quarter of last year, could be seeing more activity soon even as it was planning a “cautious” expansion into “new niche projects” .

For its first quarter to March 31, Minho made a net profit of RM11mil on a revenue of RM75.2mil compared with a net loss of RM19,000 on a revenue of RM52.5mil for the same period a year ago.

The group’s total borrowings stood at RM39.6mil while cash and cash equivalents amounted to some RM46mil, based on the latest quarterly figures. 

In notes accompanying the results, the company said the improvement in its financials for the first quarter was “mainly due to better demand for timber products”, with the major contributor being its timber extraction segment.

For the second quarter, Minho remains conservative, projecting performance to be “slightly lower” than the first quarter on reduced logging activities due to stringent conditions imposed by the authorities in the issuance of logging licences. 

As for its manufacturing and trading of timber products segment, it is expecting demand to continue to improve, while the percentage billing for its current property development project, which has a gross development value of RM19.53mil, is expected to improve as the project progresses. 

The company is 29.39% controlled by private vehicle Minho Holdings Sdn Bhd. For the financial year ended Dec 31, 2014 (FY14), Minho reported a net profit of RM5.8mil compared with RM16.7mil in FY13.

The difference in performance was attributed to a one-off gain in 2013 as a result of land disposal, as well as a lower contribution in Minho’s property segment due to delay in the launch of its Meru residential property project.
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