Xingquan to buy knit fabric machines for RM99m

KUALA LUMPUR: Xingquan International Sports Holdings Ltd plans to buy between 80 and 100 knit fabric machines, valued at RM99.21 million, via internal funds and the issuance of right shares.

The Main Market-listed company will generate RM44.31 million internally while the balance of RM50.71 million will be funded via a rights issue.

"The decision to purchase these knit fabric machines is in line with the global trend of two layer shoe sole lining and with the new machine, we can produce two layers shoe soles with one machine," said chairman and chief executive officer Datuk Qing Quan Wu after the company's AGM on Thursday.

He said phase one of the machinery acquisition would be completed in the first half of 2016.

In September, the company proposed a fund-raising exercise which would leave Xingquan with a cash pile of RM886.55 million.

Qing said of the total cash reserves, RM132.3 million would be allocated for machine maintainance and daily operational needs.

Xingquan also outlined three main strategies: identifying new and adding new Point of Sales (POS), expand its upstream business by improving its product range and aggressively venturing into the e-commerce segment.

As at June 2015, the total POS stood at 1,100 across 26 provinces in China while its current sales contribution from the e-commerce segment stood at about 10%.

"contribution from the newly acquired machines will be realised in the second half of 2016 while these strategies will definitely improve the company's bottomline and topline," Qing said.

Xingquan's pre-tax profit for the first quarter ended Sept 30 fell to RM25.58 million from RM57.58 million a year earlier. Revenue also dropped to RM134.77 million from RM202.05 million previously.

"The outlook for 2016 remains uncertain as the company is facing challenges due to China's gross development product which slowed down to 6.9% in 2015 from 7.3% in 2014.

"The recent stock market crash in China has also had a negative impact on  retail spending," Qing added.

However, the company is currently in talks with three major e-commerce providers in China to sell their products online. - Bernama