Monday, March 08, 2010

Mieco Chipboard: For Sale Again!

On today's Business Times:


  • BRDB may revisit Mieco sale option

    By Sharen Kaur Published: 2010/03/08

    Bandar Raya Development Bhd (BRDB) (1473) is mulling revisiting the option of selling its stake in chipboard maker Mieco Chipboard Bhd, its chief said.

    "We will be happy to re-explore such an opportunity if there are interested parties," BRDB chief executive officer Datuk Jagan Sabapathy told Business Times.

    BRDB has 56.8 per cent stake in Mieco, a pioneer in particle board manufacturing using rubber wood.

    The developer has been wanting to dispose of its stake in Mieco for the past four years. It spoke to several local and foreign firms but no firm deal was entered into.

    Despite being optimistic of prospects for Mieco as furniture manufacturing and the audio segment is improving in tandem with economic and industry growth, BRDB wants to sell its share in the company as it is dragging down its profit.
    By doing that, BRDB said it can also focus more on property development and investment, as chipboard and manufacturing is not its expertise.

    Mieco posted a loss of RM36.3 million in 2008. It may be in the red in 2009 after posting a loss of RM18.2 million for the first nine months of the year.

    Its managing director Datuk Yong Seng Yeow told Business Times that Mieco has been in the red because of supply and demand issues, price war, foreign exchange losses and higher operating costs.

    Mieco is consolidating its operations, allowing it to repay part of its RM150 million debt and save cost.

    "We are consolidating to bring down cost. We will hive off some overseas markets if necessary, due to logistics," Yong said.

    "The industry is going through a tough time. But when things pick up, we can be one of the contributors to BRDB's growth. We are consolidating now and will be ready to ride with the industry growth," Yong said.

    Some 40 per cent of Mieco's chipboards are sold in the domestic market. The rest are sold in Asia Pacific, the US and Europe.

    Mieco's most important markets are Malaysia, India, Indonesia, Vietnam and China.

    It has three plants in Pahang, which has the capacity to produce 900,000 m3 of chipboards per annum. But the plants are producing three times less now because of slow demand.

    Mieco has since closed one plant to save on operational cost. It is not clear if Mieco will sell the plant.

    The replacement value for the three plants is RM700 million.

Ok I have written many times on Mieco before. The latest posting was Review Of Mieco's Earnings and the past postings can be found here:

Yes BDRB had been attempting to dispose Mieco since 2005! ( See A Good Long Look At Mieco Chipboard Again )

I want to try to attempt something different this morning. I will try to understand what the Business Times article is attempting to say.

  • BRDB may revisit Mieco sale option

May. It's such a nice little word. Yeah anything may happen in stock market. Any stocks can go up and they can go down. Companies may be sold too!

  • Bandar Raya Development Bhd (BRDB) (1473) is mulling revisiting the option of selling its stake in chipboard maker Mieco Chipboard Bhd, its chief said.

    "We will be happy to re-explore such an opportunity if there are interested parties," BRDB chief executive officer Datuk Jagan Sabapathy told Business Times.

Ohh... it's not one According To Sources nonsensical articles since the comments are coming from the CEO itself.

  • BRDB has 56.8 per cent stake in Mieco, a pioneer in particle board manufacturing using rubber wood.

    The developer has been wanting to dispose of its stake in Mieco for the past four years. It spoke to several local and foreign firms but no firm deal was entered into.

Yes, BDRB first tried to dispose Mieco in Aug 2005. Why did it failed? In the posting, A Good Long Look At Mieco Chipboard Again, the reason to want to dispose is rather clear. Mieco went from being a top grade stock to a really poor stock. From a company being in a cash position, healthy profits with growth, Mieco turned in a company with a massive debts and the healthy profits turned into continuous losses!

  • Despite being optimistic of prospects for Mieco as furniture manufacturing and the audio segment is improving in tandem with economic and industry growth, BRDB wants to sell its share in the company as it is dragging down its profit.

    By doing that, BRDB said it can also focus more on property development and investment, as chipboard and manufacturing is not its expertise.

For sure any management will say they are optimistic about their company prospect. Not many will paint a pessimistic prospect of their own company.

So how is Mieco doing lately? The next sentence says it all.

  • Mieco posted a loss of RM36.3 million in 2008. It may be in the red in 2009 after posting a loss of RM18.2 million for the first nine months of the year.

The reason of losses according to the company.

  • Its managing director Datuk Yong Seng Yeow told Business Times that Mieco has been in the red because of supply and demand issues, price war, foreign exchange losses and higher operating costs.

That's a lot of reasons yes?

Supply and demand issues, price was, forex losses and higher operational costs.

  • Mieco is consolidating its operations, allowing it to repay part of its RM150 million debt and save cost.

    "We are consolidating to bring down cost. We will hive off some overseas markets if necessary, due to logistics," Yong said.

    "The industry is going through a tough time. But when things pick up, we can be one of the contributors to BRDB's growth. We are consolidating now and will be ready to ride with the industry growth," Yong said.

Hmm... Evergreen is doing rather well, yes? How come Mieco isn't?

  • Some 40 per cent of Mieco's chipboards are sold in the domestic market. The rest are sold in Asia Pacific, the US and Europe.

    Mieco's most important markets are Malaysia, India, Indonesia, Vietnam and China.

    It has three plants in Pahang, which has the capacity to produce 900,000 m3 of chipboards per annum. But the plants are producing three times less now because of slow demand.

    Mieco has since closed one plant to save on operational cost. It is not clear if Mieco will sell the plant.

    The replacement value for the three plants is RM700 million.

How?

Yeah, BDRB again is announcing to the world that it's interested to sell its stake in Mieco Chipboard but I wonder who is really interested.



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1 comment:

  1. Kris10:10 AM

    Maybe the proper caption should be : "Desparately needs to sell" instead of "Revisit".

    The one "revisit" seems to paint that they are "relunctant" to sell in the first place.

    Language is really a powerful tool :)

    ReplyDelete