by winston » Tue Sep 30, 2014 3:42 am
not vested
September 27, 2014
Why QL wants to rule the roost in Lay Hong
WHILE there is much anticipation that Lay Hong’s Yap family, who collectively own a controlling stake of 44.2%, would put up a fight to not exit the company, there is still much to learn about QL Resources Bhd’s interest in Lay Hong.
QL emerged in Lay Hong after it acquired a 23.29% stake in the latter for RM11.5mil in 2010 from London Biscuits Bhd. After buying that initial block, QL has been slowly accumulating shares in Lay Hong since March this year, culminating in its stake having been “egged on” to 26.81% at present.
QL may be the largest egg producer in the country with a production of 3.2 million eggs per day, but Lay Hong has been in the egg farming business since the 1960s and is currently producing 1.8 million chicken eggs per day and 1.5 million chickens for sale per month.
Lay Hong group managing director Yap Hoong Chai is an old hand in poultry, having been involved in the business since he was a student.
As an integrated poultry farmer, Lay Hong has three main business segments – processed chicken products such as frankfurters, nuggets and fried chicken; broiler birds and eggs. It also operates 16 supermarkets under the G*MART brand in Sabah.
Apart from its stable and vast exposure in the poultry industry, the group markets its products, which include processed chicken products, air-chilled chicken, chicken parts, table eggs and liquid eggs, under the trade name of NutriPlus and Wise Choice.
Its NutriPlus egg brand is also well-established among retailers, of which the company has about a 50% market share in Peninsular Malaysia.
Lay Hong also has recently doubled its chicken-based processed food manufacturing facilities to 1,400 tonnes per month from 500 tonnes previously, which will sustain the company’s growth for the next four years.
Over the last three years, the group has pumped in RM80mil in capital to build its manufacturing facilities, which are located in Tanjong Karang, Selangor.
QL, meanwhile, is a diversified agriculture-based company with three core principal activities, namely, marine product manufacturing, palm oil activities and integrated livestock farming.
QL is involved in eggs and broiler production and the distribution of raw materials for animal feed in Malaysia. It currently operates eight commercial farms across Malaysia, Indonesia and Vietnam. Last month QL’s group managing director Dr Chia Song Kun was quoted as saying that the company is seeking opportunities for mergers and acquisitions that complement its current businesses.
Although most analysts say the valuations set by QL to take over Lay Hong are “expensive”, the former could gain favourable synergies from the acquisition.
AllianceDBS Research says QL could benefit from new businesses such as liquid eggs, processed chicken products and supermarkets. It will also stand to gain new markets, command a larger market share, improve operational efficiencies via shared expertise and facilities, and better manage costs in the distribution of the raw materials of chicken feed arising from economies of scale.
“While QL may be able to create greater value in Lay Hong through efficiency and synergies, the apparent earnings contribution may only be realised in the longer term,” CIMB Research says.
Meanwhile, Yap told StarBizWeek in an interview back in July that one of the unique features of Lay Hong is that its farms are easily duplicated and managed. The company uses air-chilled technology on its poultry products, genetic selections in rearing chicken and has an exposure to the liquid egg business.
After all, Lay Hong recently returned to the black by recording a net profit of RM7.16mil in its financial year ended March 20, 2014 (FY14) from a net loss of RM17.79mil in FY13.
Source: The Star
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