BAMBOO VENTURE IN CHINA


Kanger group’s main bamboo processing plant in Jingzhou, a venture in collaboration with the local government of the Chinese city.

LISTED on the ACE Market of Bursa Malaysia Securities Berhad, Kanger International Berhad (KANGER 0170) is on target to become the world’s largest producer of bamboo products with the commencement of a new high-tech bamboo processing plant and R&D centre which was developed in collaboration with the local government of Jingzhou in Hunan Province, China.

Kanger has accumulated vast experience and strong know-how of the bamboo industry, having been involved in the bamboo processing business over the past 16 years.

The group’s main bamboo processing plant was relocated to Jingzhou from its previous location in Ganzhou, Jiangxi Province.

With the relocation, the group entered into a public private partnership arrangement on a 70:30 basis with the local Jingzhou government to construct a new bamboo processing plant and R&D centre that adopts the latest modern processing methods capable of processing raw bamboo into a wide variety of products.

The new plant was built at a total investment cost of CNY200mil (equivalent to RM121mil).

“Armed with the support from our strategic partner, the local government of Jingzhou, we are in a strong position to significantly upscale our bamboo processing business to become one of the world’s largest integrated bamboo producers with both upstream (plantation) and downstream (processing, manufacturing and distribution) capabilities, ” said Kanger’s newly appointed executive director Steven Kuah Choon Ching.

There is ready availability of raw bamboo in Jingzhou, said Kuah.There is ready availability of raw bamboo in Jingzhou, said Kuah.

“One major advantage of relocating our bamboo plant to Jingzhou is the ready availability of raw bamboo there. By partnering with the Jingzhou government, they will inject a bamboo plantation concession totalling an estimated 8,431ha over three phases.”

“The ready-to-harvest raw bamboo surrounding the plant will serve as a steady source of raw material supply in the production of bamboo products and acts as the key factor in the upscaling of our own bamboo products segment.

“By being less reliant on external supply sources to produce bamboo products, this would prevent us from facing problems such as supply shortages and sudden price hikes which could have material effects on the cost of raw material and our profitability.

“Our venture upstream into bamboo plantation concession represents a critical component in building a resilient business model. A continuous steady stream of raw bamboo supply strengthens the success factor of this project, laying a solid and sustainable foundation for the business, ” said Kuah.

Under Phase one, a surrounding area of approximately 2,430ha of fully mature bamboo has been made available. The group estimates that it will take up to three years to utilise all of the ready-to-harvest raw bamboo for flooring, furniture and building materials, which could potentially generate a total revenue of CNY800mil over the three-year period.

In addition, as Kanger does not need to purchase raw bamboo from external sources, this translates to a cost savings of more than CNY300mil for the equivalent amount of raw bamboo available.

With construction of the plant and commissioning of the machinery and equipment now completed, testing works are being carried out, with full commercial production commencing in the fourth quarter of 2020.

Kanger leased this building to Ganzhou Fuying Kaili Hotel Management Co Ltd to operate as a hotel.Kanger leased this building to Ganzhou Fuying Kaili Hotel Management Co Ltd to operate as a hotel.

Moving forward, the group will focus not only on manufacturing of bamboo products but also processing of bamboo related foodstuff and bamboo eco-tourism. This will attract more tourists to Jingzhou and encourage the setting up of more bamboo-related businesses among the villagers.

Backed by a healthy operating cash flow generated by the group’s China operations, the group has set its sights on establishing new revenue streams in Malaysia.

Recently, Kanger purchased a parcel of land measuring 2.2ha in Kuala Selangor for RM6.8mil. The group is actively looking out for strategic opportunities with attractive prospects to invest in.

Committed to delivering long-term shareholder value, Kuah said: “With the commencement of our new high-tech bamboo processing plant in the fourth quarter of 2020, our financial performance in the coming year will be significantly enhanced by the contributions from the production and sale of our in-house bamboo products.

“Looking ahead, we are confident that demand for bamboo will see exponential growth driven by its increasing use as a sustainable material for construction and rising consumer awareness on the benefits of bamboo.

“In addition, the R&D centre at the new bamboo processing plant will be utilised to pursue opportunities with regards to modern bamboo products and uses.

“Meanwhile, our business is also enhanced by the lease income from our two commercial properties which will provide recurring income to the group, thus enhancing our income visibility.”

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