Golden Frontier exits Vietnam, to invest RM550m in Malaysia

Penang-based Golden Frontier Bhd is exiting Vietnam and training its sights back home with fresh investments, 14 years after venturing into the country’s packaging industry and ploughing an estimated $6 million (RM18.18 million) there.

Executive chair and group managing director Datuk Khor Ten Haw said new investments will include a RM400 million new paper mill in Nibong Tebal on mainland Penang and a RM150 million corrugating plant in the central region.

“It is only once we have established ourselves as an integrated paper player and strengthen our position in Malaysia that we will look at expanding regionally,” Khor said after the company’s 38th shareholders’ meeting in Penang yesterday.

During the meeting, Khor told shareholders that the devaluation of the dong and the shrinking margins caused by stiffer competition had resulted in the company deciding to sell its Vietnam plant to Thai Containers Group Company Ltd

He said the offer price of $21 million (RM63.63 million) made by the purchaser represented a very good exit value.

“Vietnam’s packing industry is moving towards a matured market and since 2006, we have seen many large-sized corrugated carton companies setting up operations there.

“Many of these companies have their own paper mills supplying paper to them, so they have advantages over the control of paper costs and supplies,” he added.

Khor said if Golden Frontier wanted to continue as a market leader, it would need to inject more investments there.

“We are reluctant to commit to such large-scale investments as this would lead to heavy gearing to the group, particularly in relevance to the potential increase in returns,” he said.

On the new corporate direction for the company at home base, Khor said the proposed new paper mill in Penang will see an intial capital outlay of RM150 million in the first two years and the remaining RM250 million in the following three years.

“As the market in the northern region is considered a secondary market, we are looking at moving into the central region where we are looking at setting up a permanent corrugating plant with an initial investment estimated at RM50 million to be expended in the next 12 months.

“Another RM100 million is expected to be ploughed in over the next three years and the proposed plant is expected to start operations within the next 9 to 12 months.”

Khor said the proposed facilities will be funded with proceeds from the sale of the Vietnam operations (which should be concluded by April) and internally-generated funds. It may also turn to the capital market, he added.

http://www.btimes.com.my/articles/guden/Article/

Tags: Vietnam business news