Thursday, January 6, 2011

Priceworth set to seal foreign deal

Priceworth Wood Products Bhd (7123)is in final leg of negotiations to manage two timber concessions overseas that have a combined land size in excess of 100,000 hectares, says its executive director Michael Chok Syn Vun.

"The concessions are in Papua New Guinea (PNG) and Solomon Islands," Chok told Business Times in an interview at his office in Sandakan, Sabah, yesterday.

He said Priceworth would have to spend as much as RM2 million in the first phase to help move machinery and other related assets to these places if the deal goes through.

Chok did not want to provide a timeline on when a decision will be known.
However, it is reliably understood that Priceworth could make an announcement on the matter before the month is over.

On the financing, Chok said the company has several options. These include tapping its own cash holdings, which stood at RM12 million as at end of its 2010 financial year, or proceeds of its planned warrant exercise.

Priceworth is proposing one warrant for every two mother shares at a conversion price of 50 sen a share. The book value per share of Priceworth as at end June last year was RM1.55 a share.

The Sabah-based timber company is banking on the overseas ventures to help expand its revenue base above the RM500 million mark in the coming financial year ending June 30 2012.

Priceworth posted revenue of RM446.08 million last year against RM457.28 million in the year before.

If the deal to manage the two concessions comes through, it will be a blessing for Priceworth as the company has been absorbing the effects of the stronger ringgit against the US dollar.

"About 85 per cent of our revenue comes from abroad, namely from Japan and the US," said Chok, adding that the lower value of the export currency had crippled its margins.

In 2010, Priceworth registered a pre-tax profit of RM3.2 million, while in the year, before its pre-tax profit stood at RM7.14 million.

"It is a capital-intensive business," said Chok, adding that the company has more than 3,000 people on its payroll to help manage its seven factories located within the Sandakan district.

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