CSL plans to file IPO on Bursa Malaysia by this month

  • Business
  • Saturday, 04 Feb 2012

MAKING stationery products might not be the the most exciting business out there but it does not mean there is no money to be made from it. Case in point is China Stationery Ltd (CSL), which is headed for the Main Market of Bursa Malaysia.

Not only is the Fujian, China-based company profitable, the company is one of the top four stationery manufacturers in China, a country that has some 8,000 companies producing products similar to what CSL makes.

As an integrated plastic stationery company, CSL has its own brands of plastic stationery products, proprietary products and technical know-how. Its products are basically divided into two main categories, patented and non-patented.

CSL designs and manufactures an assortment of more than 450 plastic filing and storage products such as expendable files, pocket files, compact-disc holder files and business-card holders. It sells its products under its own brands such as Sakura, Nachi and Foldersys.

“We have more than 20 years of experience in the stationery industry. Most of the companies in China are smaller and they produce three to five types of stationery products.

“Everytime there’s an economic slowdown, smaller companies may not be able to withstand it and the market and market share in the industry will be reassigned,” executive chairman Chan Fung @ Kwan Wing Yin tells StarBizWeek. Apart from files and storage, Chan says CSL also manufactures plastic tape printer, which was the company’s main proprietary and patented product. He adds that CSL will be launching two new patented products this year, namely anti-tampering plastic envelopes and second generation plastic tape printers. Both products are expected to start contributing to the company’s bottomline this year.

Without disclosing details, Chan says each product has its own gross profit margin but they differ depending if they are patented or non-patented.

“We introduce new products every year. The patented products contribute a higher margin. For our plastic tape printer, our margin is as high as 60%,” Chan says, adding that the plastic tape printer retails at about RM150 each is suitable for small and medium enterprises.

He says CSL reduces waste as much as possible to maintain cost. He explains that all the plastic waste will be “thrown back to be re-melted” for production, thus reducing as much waste as possible.

Chan says CSL currently exports to over 45 countries and to more than 400 customers including distributors, retailers and corporations in China, in other parts of Asia, in Europe and the United States.

For the financial year ended Dec 31, 2010, sales to China accounted for 28% of CSL’s revenue. The rest of Asia contributed 33% to its revenue and this was followed by the US and Europe contributing 16% each. The rest was from smaller importers.

Its revenue for the period rose 30% to RM669.9mil from RM556.3mil in the financial year 2009. Its net profit rose in tandem to RM189.1mil in 2010.

During the same period, CSL’s patented products contributed 28.2% to revenue while the balance 71.8% was derived from non-patented products.

For the first seven-month to July 31, 2011, CSL posted a net profit of RM105.9mil on revenue of RM451mil. Its cash and cash equivalent for the first seven months to July 31, 2011 stood at RM532.2mil.

Going forward, Chan says the company will focus on continued research and development (R&D) and new products. Chan has been entrusted with R&D to come up with new products together with friends, schools and others in the past. “We are planning to expand our R&D centre, working with others to enhance our products,” he says.

“The industry is still growing. Storage devices change over time to cater to demand. We will have to come up with a different kind of storage for paperless offices,” Chan says when asked if CSL was in a sunset industry as companies are going green today.

“The global stationery market is growing. The industry is estimated to be worth US$100bil,” he says.

According to Frost & Sullivan, the global plastic stationery market was worth about US$75bil in 2010 and is expected to grow at a compound annual growth rate of 5.3% from 2010 to 2014.

On its initial public offering (IPO), CSL is issuing 90 million new shares at 95 sen, of which 60 million shares will be made available for the public while the remaining 30 million shares will be for private placement for selected investors. CSL is looking to raise RM85.5mil from its IPO exercise. The company is slated for a listing on Feb 24.

For a company that has RM532.2mil in cash, Chan admits CSL does not really need the money from an IPO.

“RM500mil is a big amount for an individual but for corporate, not so...,” he says, adding that in order to grow bigger, CSL will need to expand and strengthen its brandnames.

Of the total proceeds, RM29.42mil will be allocated for the purchase of machinery; RM25mil for research and development; RM10.78mil for advertising, branding and promotional activities; RM10mil for working capital and the remaining RM10.30mil for listing expenses.

Going forward, CSL intends to have a dividend policy where no less than 20% of its net profit will be distributed to shareholders.

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