Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on March 22, 2021 - March 28, 2021

EVERY job is an opportunity to learn something new.

Peter Chai Mui Seng, founder and executive chairman of Johor-based aerosol spray paint maker DPI Holdings Bhd, should know.

Without the benefit of a formal education, Chai, born in 1945, started his working life as a cleaner and waiter at a coffee shop about 60 years ago. Subsequently, he had stints as a bar cashier, barber, clerk in a timber company, building materials salesman and building contractor.

Today, Chai and his son Adam are the major shareholders of DPI, with a collective shareholding of 74%. The company which Chai founded in 1982 was listed on the ACE Market of Bursa Malaysia in January 2019.

“As a small company, we have been paying dividends consistently since listing. Perhaps that made investors feel more comfortable to buy our stock. Some of them might also like our fundamentals and financial strength, deeming us as a nice, little, solid company, whose shares can be invested in and kept for the long term,” he tells The Edge in an interview.

1968 was a career-shaping year for Chai. He joined Japanese paint giant Nippon Paint as a salesman in Sarawak, before he was promoted to sales manager and transferred to Sabah. He then moved to Medan, followed by Jakarta, where he became the general manager of the paint marketing department.

After spending six years in Indonesia, he moved back to Malaysia, and subsequently started DPI, which stands for “Dynamic, Progressive, Innovative”. From a small operation manufacturing only 30 colours of aerosol spray paint, DPI’s business has since grown steadily and it now claims a market share of more than 25% in Malaysia, making it the market leader in the segment.

“We have been making aerosol products for more than 40 years. Today, we are supplying more than 300 colours to over 700 distributors and retailers in Malaysia, including automotive repair and art and craft shops, DIY (do-it-yourself) stores, and other retail outlets,” says Chai.

The group currently owns three in-house brands — Anchor, Kromoto and DPI — catering to different market segments. As for its original equipment manufacturer (OEM) business, DPI has eight customers locally and internationally, including in Australia, Indonesia, Japan, New Zealand and Singapore.

Lately, the company has been gaining traction with investors. Year to date, the counter is up 50%, and at last Friday’s close of 42 sen, it had a market capitalisation of RM204.43 million.

Its share price gains have been partly driven by its stellar earnings performance in the first half ended Nov 30, 2020 (1H FY2021), which surpassed the group’s full-year performance for financial year ended May 31, 2020 (FY2020).

DPI’s net profit grew 62% year on year to RM6.53 million in 1HFY2021 on the back of lower raw material prices. On an annualised basis, the group should be able to close FY2021 with a profit of around RM13 million, which will be more than double its bottom line of RM6.04 million in FY2020.

“I can’t comment too much on our financial performance in 2HFY2021, but I think it is fair to say that FY2021 will be a very good year for DPI. I think some investors have started to realise the growth potential of our company, and they like our expansion story,” says Chai.

He observes that the overall market demand for aerosol spray paint has been improving and DPI’s business has not been affected by the Covid-19 pandemic.

“In fact, many people started buying our products when they stayed at home during the Movement Control Order period because when they had nothing to do, they didn’t mind spending some money to beautify their cars and motorcycles,” he explains.

DPI’s manufacturing facility in Muar can produce 9.7 million aerosol cans every year. The group is in the midst of building a new plant adjacent to its existing factory, which will also be extended.  

“Construction work is ongoing now. Once our expansion is completed in November, our total installed capacity will more than double to 20 million aerosol cans,” Chai says.

He notes that DPI’s existing product portfolio mainly consists of industrial products, or “dirty products”, used for cars and motorcycles at repair shops.

Going forward, DPI plans to diversify its product range to cover non-industrial and green products. For now, it is allocating about 10% or two million cans of its total installed capacity to produce clean, household products.

“The first clean product we are making will be disinfectant spray cans. Then, we plan to make deodorants, fresheners and non-chemical insecticides. In future, we might be able to make semi-pharmaceutical or healthcare products,” Chai says.

Meanwhile, DPI is also eyeing opportunities, be they mergers and acquisitions or joint ventures, in overseas markets, as Chai believes market opportunities at home are limited.

“Over the past 30 years, we have been exporting our products to other countries such as Japan and Indonesia. But to us, that’s not enough. We need to expand our product portfolio and we need to have a direct presence in the foreign markets,” he stresses, adding that DPI is looking to acquire an aerosol product maker in Australia.

“We have been talking with them for a couple of years, but nothing has materialised, partly due to the pandemic. Hopefully, when travel restrictions are lifted, I can finalise the last few conditions with them. Ideally, we hope to team up with them, but we intend to get a 75% stake,” Chai says. He adds that DPI wishes to complete the acquisition of the Australian company, which has an annual revenue of A$6 million to A$7 million (about RM20 million), sometime this year.

“What we like about this company is that their profit margin is quite good. We hope to manufacture their products in Malaysia, and sell (them) through their sales and distribution networks. By doing that, we could help them save some operation and labour costs and improve their margins further.

“As for DPI, we could utilise our additional capacity and enhance our product portfolio. It is still early to speculate on the acquisition price, but suffice it to say, money is not a problem for us,” Chai declares.

DPI had strong cash reserves of RM57 million as at Nov 30, 2020, of which RM26.12 million has been allocated for capacity expansion in Muar. In other words, the company has up to RM31 million for M&A activities and other overseas expansion plans.

In May, DPI will also be setting up a JV company in Japan, in which it will own an 80% stake. The remaining 20% of DPI Japan will be held by its Japanese partner, which has 38 years of experience in the aerosol industry.

“Our plan is to use the JV company as a vehicle to acquire some companies and businesses in Japan. For now, we are eyeing small- and medium-sized, family-owned aerosol companies, which have their own niche and speciality products,” Chai says.

 

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