PLYWOOD manufacturer Eksons Corp Bhd is actively looking at diversifying into strategic business areas in the country.
Executive director Tang Seng Fatt said the group was embarking on its maiden joint-venture commercial property project in Seri Kembangan, Selangor, and was seeking suitable investments in oil palm plantations within the next five years.
He told StarBiz that it was timely for Eksons to diversify into new businesses as the group was on a better footing with a strong cash position.
This has enabled Eksons to propose a capital repayment exercise of RM32.8mil, which is slated for completion by March next year.
Barring any unforeseen circumstances, he said, the group should be in a position to pay dividends in 2008 – the first since its reverse takeover of Chongai Corp Bhd in 2000.
Over the past five years, Eksons has been busy putting its house in order.
“We managed to cease our non-profitable garment operations last year, and now our sole business is in the manufacture of high quality 3mm-and-below (thickness) plywood, sawn timber and veneer.”
However, due to the cyclical nature of the timber business, the group plans to reduce its dependency on the plywood operation.
Tang said Eksons was constantly searching for suitable investment opportunities in Malaysia.
“We are keen on making investments that will be worth the return,” he added.
He explained that the move into property and oil palm plantation would help generate new income sources for Eksons in its effort to enhance earnings and shareholders' return.
On oil palm plantation, Tang said the group was still on the lookout for investment opportunities in Sabah and Sarawak.
“For economies of scale, we are initially looking for at least 10,000ha to enable us to set up either one or two palm oil mills in the foreseeable future,” he added.
Tang said Eksons considered the venture into oil palm plantation as a good investment with long-term and stable prospects.
As for property, he said the group had entered into a joint venture with Tempo Group to undertake a commercial property development project in Seri Kembangan, Selangor.
“The initial gross development value of the project is over RM300mil,” he said, adding that the 55-acre site would be developed within a seven-year period.
He said the first phase of the project (which has yet to be named) would be launched mid next year.
According to Tang, despite the focus on diversifying into new businesses, plywood manufacturing will remain Eksons' core business.
“Our two mills in Sibu and Tawau are generating good cash flow, particularly with the current favourable plywood prices hovering at US$450 per cu metres and strong demand from overseas,” he said.
Tang said the price of plywood had risen about 15% since the beginning of this year.
“This augurs well for the group and we hope to perform better this year compared with last year,” he added.
Both mills have a combined installed capacity of about 23,000 cu metres per month.
Of the total production, 95% is exported. Tang also said Eksons was undertaking a feasibility study on the possibility of manufacturing new value-added products such as fancy plywood for the export market.
He said the group was aggressively exploring potential new markets for its plywood products.
To date, Eksons’ major export markets include the United States, Mexico, Middle East and South-East Asia.
Meanwhile, Tang said the group expected its RM20mil 3MW biomass co-generation power plant in Tawau to be commissioned by March next year.
“The power plant is part of a strategy to mitigate against the rising production costs and to substitute our existing diesel-powered generators in the plywood mills,” he said.
Tang said the power plant, which uses waste wood from the mill, would see the energy costs for this mill slashed by more than 70% in the near future.
On the group's outlook, Tang expressed confidence that 2006 would be a reasonably good year for Eksons.Ekson set to ride on high plywood prices, say analysts
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