Packaging division to drive growth for Mega First

KUALA LUMPUR: Although Mega First Corp Bhd has been reaping benefits from the Don Sahong power plant, it will continue to push for more earnings growth from its core businesses.

PublicInvest Research said the group’s packaging division would be the key growth driver in the next three years and better sales growth in the limestone business would be seen amid anticipation of strong economic recovery.

“To cope with increasing demand, the 60%-owned Hexachase Group is currently seeing aggressive capacity expansion for its paper bag and flexible packaging capacities, which are expected to increase by 200% and 100%, respectively.

“The new capacities will come on stream by the third quarter ending Sept 30.

“To cater for long- term capacity expansion, construction of a mega plant on 10-acre plot of land will start soon and is expected to be ready by next year, ” it added.

For the packaging division, PublicInvest Research said Mega First’s capital expenditure is around RM120mil to RM150mil for the next two years.

However, the research house said the group’s packaging arm is expected to face multiple cost pressures this year due to raw material prices, freight charges and transport costs despite stronger demand.

“In addition, the stronger ringgit may also have a knock-on effect on export margins, ” it added.

Meanwhile, PublicInvest Research noted that the group’s capital expenditure for the next four years would be close to RM1bil.

Mega First plans to allocate RM200mil for the engineering, procurement, construction and commissioning works should the group be awarded a Large-Scale Solar 4 or LSS4 project.

Besides that, Mega First expected its first quarter ending March 31 energy availability factor to be higher year-on-year supported by better power distribution and improved generation efficiency through the Electricite Du Laos’ new 500kV transmission line from Ban Hut substation to the Cambodian border despite the low water level.

The water level at the Pakse substation fell drastically below one metre since February due to dry weather conditions.