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Thursday, November 26, 2015

Kim Teck Cheong jumps 130% on debut

This article first appeared in The Edge Financial Daily, on November 26, 2015.
KUALA LUMPUR: Kim Teck Cheong Consolidated Bhd (KTC) ( Valuation: N/A, Fundamental: N/A), which saw its share price jump 130% on its debut on Bursa Malaysia’s ACE Market yesterday, is not only expanding its distribution network to Brunei, but is also eyeing the Philippines and Indonesia.

The Sabah-based packaged goods distributor’s executive director Dexter Lau said the move to Brunei, while not a substantial market, is to complete its distribution network in Borneo to give the company an advantage to secure more businesses in the future.

After that, it plans to go into Indonesia and the Philippines, though such plans are still at the preliminary stage, said Lau.

Lau reiterated that the Brunei expansion will be through the acquisition of a company in the country for RM1.54 million, to be funded internally and not from proceeds of its initial public offering (IPO).

“We will then own a distribution centre in Brunei. This will bring the number of distribution centres to 19. We will be making the announcement in the first quarter of 2016,” he said.

KTC is one of the largest consumer packaged goods distributors in Sabah and Sarawak now, with 6,419 sale and distribution points covering over 84 districts, and 18 distribution warehouses and centres. It mainly distributes third-party brand products like those by Gillette, Dynamo, Coca-Cola, Kimberly-Clark, Revlon and Shiseido.

Lau: We aim to transfer to the Main Board in one and a half years or two years’ time.

KTC shares jumped as much as 19.5 sen or 130% to hit a high of 34.5 sen yesterday, and was the most active stock across the bourse. It opened at 30 sen apiece, double its IPO price of 15 sen, with about 14.01 million shares traded.

KTC is eyeing an upgrade to the Main Market within two years. Lau said this is because the company has already fulfilled the Main Market’s listing requirements, as its business has grown tremendously when it was preparing for the IPO.

“We aim to transfer to the main board in one and a half years or two years’ time,” Lau told reporters during KTC’s listing ceremony.

On whether the prevailing low consumer sentiment would affect KTC, Lau said its distribution business is still robust and the company is expecting to maintain its double-digit revenue growth moving forward.

“Our business is trending upward at a strong double-digit growth [in revenue],” he said, adding that the company has been growing at an average rate of about 15% in recent years.

He also noted that the company is in the consumer business, which is resilient in good or bad times.

“The consumption of the products [we distribute] is still there. We don’t see [low consumer sentiment as a] major concern,” he said.

The distribution of third-party brands makes up the bulk of the company’s revenue at over 90%, and Lau expects the ratio to remain the same in the near future.

In the first quarter ended Sept 30, 2015, KTC posted a net profit of RM2.48 million, on the back of a revenue of RM78.65 million.

KTC’s IPO involved a public issuance of 142 million new shares at 15 sen each, valuing the company at RM76.54 million, based on the group’s expanded issued share capital of 510.28 million units. At the close of trading hours yesterday, the company’s value had more than doubled to RM163.61 million when it settled at 32 sen, 113% or 17 sen higher.

The listing of KTC shares has raised some RM21.3 million for the group; 42.26% of that has been earmarked for business expansion,which includes the acquisition of warehousing facilities in Sibu, Miri and Kuching, all in Sarawak.

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