HeveaBoard, SHH Resources in talks

KUALA LUMPUR: HeveaBoard Bhd said yesterday it is in talks with SHH Resources Holdings Bhd on potential synergies but stopped short of confirming reports of a potential takeover of SHH Resources by HeveaBoard.
HeveaBoard group managing director Yoong Hau Chun told reporters at a briefing yesterday that the two parties had met to discuss various issues, but said there is "nothing firm in the near term".
News of the potential acquisition first surfaced in March this year when a local financial weekly reported that details of the acquisition were being discussed.
SHH Resources manufactures solid wood furniture and exports to the US. It has fully integrated furniture manufacturing facilities on 17ha in Pagoh, Johor.
CIMB Research has said a takeover is unlikely in the near term as both parties operate in different segments of the furniture market.
Meanwhile, HeveaBoard expects to turn into a net cash position by year-end or early next year after paying off its term loans. "Our term loans in dollars have been mostly repaid to (now) less than US$9 million and we expect to fully repay in the near term.
"This will put us in a strong position to increase our dividends payout to reward shareholders in the future," said Hau Chun.
To date, it has over RM237 million in tax incentives which will be used to set off future taxable profit. It had about RM50 million cash as at the second quarter ended June 30, 2015.
According to Hau Chun, the group plans to spend RM15 million in capital expenditure (capex) for the next one year for both its upstream and downstream divisions.

He said the capex will be used to upgrade its production plants in Gemas, Negri Sembilan, with better equipment that will enable it to offer higher quality products to customers.
Executive director Yoong Li Yen said the group will venture into the business-to-consumer market by adding eco-friendly children's furniture into their offerings.
The group plans to pursue the digital marketing platform to expand customer reach and engagement
.
"We will start with Malaysia by year-end or first quarter of 2016 and plan for the Asean region at a later stage," she said.
Li Yen said the group spent RM20 million in capex over the last two to three years to prepare its downstream segment to produce low-formaldehyde children's furniture.
For the financial year ending Dec 31, 2015 (FY15), the group aims to achieve 10% growth in revenue from the RM422.36 million achieved in FY14. Revenue for the first six months ended June 30, 2015 stood at RM227.75 million.
Hau Chun said revenue growth will be driven by several factors, including the strengthening US dollar, the company's strategy of offering higher value and value-added products as well as robust growth in the Chinese and Japanese markets.
Over 80% of HeveaBoard's revenue is from overseas.
Hau Chun said all its costs are denominated in ringgit while over 90% of its revenue is denominated in dollars.