This article first appeared in The Edge Financial Daily on October 9, 2019

KUALA LUMPUR: PRG Holdings Bhd, which has diversified from its core business of manufacturing niche furniture products into property development and recently retail, is now including timber logging to give itself more revenue streams.

The group, which has recorded losses since last year, said its financial performance has been volatile due to the decline in the sales of its elastic textile and webbings products by its Hong Kong-listed 54.19%-owned unit Furniweb Holdings Ltd, as well as the slowdown in the Malaysian property development and construction industries.

PRG said the chances of it posting a profit for the current financial year ending Dec 31, 2019 (FY19) were slim as Furniweb, which contributes over 50% to the group’s revenue, has been affected by weaker demand, having posted a net loss RM4.01 million for the first half of the year.

“Furniweb’s sales have been affected by the impact of the trade war, and a general weaker demand as a result. But we believe the worst is over. We expect to do better in the subsequent quarters,” PRG director of corporate affairs, Hannon Cheah, told reporters after the group’s extraordinary general meeting yesterday.

PRG made a net loss of RM9.18 million for FY18 compared to a net profit of RM780,000 in FY17, as revenue fell 6% to RM148.63 million. Besides the manufacturing division, the rest of its revenue is mainly contributed by the property segment.

The group also operates in the healthcare and retail segments though contributions remain insignificant.

Cheah said for the property segment, PRG will focus on building affordable homes instead of luxury ones to give it better prospects in the sector.

Yesterday, the group secured its shareholders’ nod to buy two pieces of teak tree plantation land in Kelantan for RM89.2 million from Alifya Forestry Sdn Bhd.

The first parcel in Gua Musang district, measuring 137 hectares (ha), is an agriculture land with a 50-year leasehold period expiring on June 21, 2053, and the second in Lojing sub-district, measuring 227.79ha, also has a 50-year leasehold that will expire on Aug 7, 2066.

The acquisition will be satisfied via a combination of RM59.2 million cash, as well as the issuance of 40.3 million new shares at 74.45 sen each amounting to RM30 million.

Cheah said PRG’s unit, PRG Agro Sdn Bhd, has received an offer from a local company to buy the timber harvested from the two parcels of land.

“The estimated volume of timber on the land is 150,000 cu metres (based on raw log format) and it generates a potential value of RM180 million based on the value per cu metre of RM1,200,” he said.

He said the group is also looking at exporting the timber to China and India soon.

“The group has obtained a foreign activity permit to harvest the teak trees on one of the parcels of land, and will make a submission for a permit for the subsequent parcel soon,” he said.

PRG will also evaluate the market conditions and growth prospects prior to completing the harvesting of the teak trees, before opting to either replant the land with new teak trees or introduce new commercial crops, Cheah said.