Friday 29 Mar 2024
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KUALA LUMPUR: China-based ACE Market-listed XingHe Holdings Bhd is teaming up with Arab Supplier Fabrication and Retail Sdn Bhd (Asfar) to set up an edible oil manufacturing plant in the Port Klang Free Zone (PKFZ), Selangor, as well as explore export opportunities to the Middle East, Africa, Europe and Southeast Asian regions. 

The plant, to be completed in the first half of 2016, is expected to produce about 10,000 tonnes of oil per month, and contribute about RM200 million in revenue to the joint venture (JV) company, which will be equally owned by XingHe and Asfar.

“We expect our partnership with the Asfar group to contribute positively to our future earnings as we strengthen our foothold in foreign markets, especially in Jordan where Asfar has a supply concession,” XingHe executive director Stephen Ng Min Lin told reporters after the partnership signing ceremony yesterday. 

Asfor is a manufacturer and exporter of palm-related products.

Ng is of the view that the partnership will open up more business opportunities and increase XingHe’s (fundamental: 1.2; valuation: 1.2) presence in these markets. 

“With both companies’ expertise and experience in the edible oil industry, we are confident that the JV will be a success and we are looking at generating additional revenue of 15% to 20% in the first year itself,” he said.

Ng added that exporting to Jordan will give XingHe a profit margin of about 15% to 20% compared with the 10% to 11% margins from products it currently sells in China.

Under the partnership, XingHe will provide an initial investment of RM10 million to build the packing and processing factory to produce several types of oils and fats such as peanut oil, soya bean oil, palm oil and blended oil for export purposes. 

Asfar will also invest another RM10 million to fund the operational expenses besides bringing in businesses, concession off-take and contracts from their existing networks in the Middle East and other regions.

Ng said the reason for setting up the factory in Malaysia instead of Jordan is because it is easier for the JV to source raw materials like palm oil.

“Jordan is not like Malaysia, which is rich in natural resources and raw materials. Therefore, we prefer to conduct most of the processes here before exporting to the Middle East,” he said.

According to XingHe’s statement yesterday, total investment value for the JV may come up to RM90 million within the next five years.

“The JV entity will be able to access the Jordan market, with the benefits such as special tax exemption, priority of using the port, warehouse facility and subsidises given by the Jordanian government, to be the main supplier of edible oils in the country,” it said.

Trading in XingHe shares was suspended yesterday. The counter closed up 4.35% at 12 sen on Monday, bringing a market capitalisation of RM281.82 million.


The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to theedgemarkets.com for more information on a company’s financial dashboard.

 

This article first appeared in The Edge Financial Daily, on April 1, 2015.

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