KUALA LUMPUR: Johor-based SCGM Bhd, the country’s largest thermal vacuum forming plastic packaging manufacturer, expects its revenue growth for the financial year ending April 30, 2016 (FY16) to remain in single digit from FY15, mainly from increased contribution from its plastic cup segment.

Revenue for FY15 grew 6.3% to RM106.6 million from RM100.3 million for FY14. 

SCGM managing director and chairman Datuk Seri Lee Hock Seng said the group is expected to see full-year contribution from its new plastic cup production line, which came on stream at its existing plant in Kulaijaya, Johor, in December last year.

"Demand for plastic cups currently comes from wholesalers who purchase these cups in huge quantities to supply to local retailers," he told The Edge Financial Daily in an interview.

"Going forward, we see the plastic cup manufacturing business contributing to some 7% to 8% of the group's revenue," he said.

In October last year, Lee told The Edge Financial Daily that contributions from the new plastic cup production line to the group's revenue are expected to be significant, with a target of about RM20 million per year.

For starters, the plastic cup manufacturing business is expected to contribute some RM7 million to RM8 million in revenue for FY16.

Lee said SCGM also plans to expand into new markets, in particular China, Japan and Hong Kong, in FY16 to achieve growth.

He said the group will be leveraging services provided by the Malaysian External Trade Development Corporation to promote its products in Hong Kong.

SCGM's export sales for FY15 grew to RM49.2 million from RM43.8 million for FY14, accounting for 46.1% of the group’s revenue. Its major export markets include Singapore, Australia and the Philippines.

Lee said the group's expansion into Australia with its ethylene vinyl alcohol packaging materials, which fetches a higher margin, had been “very successful”, and it currently supplies to four clients there, including Australia-listed Pro-Pac Packing Ltd.

Meanwhile, Lee said the group is on track to see contributions from its export sales surpass the local market for FY16.

“We expect more than 50% of our revenue to be contributed from the overseas markets from FY16 or FY17, and this will be driven by our plastic cup manufacturing business when we reach full capacity. [Demand from] Malaysia alone can no longer sustain the output that we produce,” he added.

On dividends, Lee said SCGM (fundamental: 1.7; valuation 2.6) will continue to pay out at least 40% of its annual net profit to shareholders.

For FY15, the group declared total dividends of 14 sen per share or RM11.2 million. The payout translated into 71.6% of its net profit of RM15.7 million.

SCGM’s share price has surged 102% year-to-date from RM1.82 on Jan 2, to close at RM3.68 last Friday, with a market capitalisation of RM156 million. As at July 31, 2014, Lee and his family owned 55.05% of the company, while its institutional shareholders, including JPMorgan Chase Bank, MAAKL Progress Fund and Kumpulan Wang Persaraan (Diperbadankan), held some 15%.

This article first appeared in The Edge Financial Daily, on June 29, 2015.