With the potential of more brands added to KTC’s portfolio for distribution, AllianceDBS Research forecasted the group’s revenue to grow by 13 per cent in FY16 supported by the introduction of several personal care products and household product brands.
KUCHING: Analysts believe Sabah-based Kim Teck Cheong Consolidated Bhd (KTC) has huge potential to grow its business in East Malaysia.
AllianceDBS Research Sdn Bhd (AllianceDBS Research) yesterday said the growth potential for the consumer packaged goods (CPG) distributor is large with market size for the distribution of CPG in East Malaysia estimated at RM6.8 billion.
The research firm believed the large market size provides room for KTC to expand its earnings and market share going forward.
To note, KTC provides market access to a wide range of CPG which include food and beverage (F&B) products, personal care products, household products, baby care products, and over the counter (OTC) drugs and supplements. The research firm observed that the group currently distributes 194 brands with 10,348 stock-keeping units (SKU) of CPG.
“ KTC’s distribution points, which are mostly in Sabah, grew by a three-year compound annual growth rate (CAGR) of 30.6 per cent from financial year 2012 (FY12) to FY15,” it said in a report yesterday.
“The growth rate showed the group has a steady growth momentum. We believe KTC will deliver on its near term distribution expansion plan.”
Interestingly, AllianceDBS Research said KTC is also focusing on Sarawak with plans to set up three distribution centres and increase its warehousing facilities from 25,360 square feet (sq ft) to 45,000 sq ft, a growth of 77.4 per cent.
In Sabah, the research firm noted the group intends to increase its warehousing facilities from 229,542sq ft to 265,456sq ft, an increase of 15.6 per cent.
AllianceDBS Research observed that Servay Group is KTC’s largest customer, accounting for 16.6 per cent, 15.8 per cent and 13.5 per cent of total revenue respectively in FY13, FY14 and FY15.
Meanwhile, KTC has identified 2,000 potential distribution points in Sabah and Sarawak to be realised in the near term.
The research firm believed the increase in customer distribution points will further improve KTC’s customer base in East Malaysia.
In the meantime, KTC tied up a non-exclusive distributorship with renowned soft drink manufacturer, Coca-Cola in September 2014 for Sabah and Labuan.
The research firm said the partnership has positively impacted the group’s revenue in FY15.
AllianceDBS Research believed the success of Coca-Cola brand distribution in Sabah has paved the way for other well-known brands to engage with KTC in the near future.
Hence, the research firm foresees more brands enlisting KTC as a distributor in East Malaysia.
It observed that the brands include among others “Aqua Label”, Tsubaki, “ZA”, “Revlon”, and Phillips which are some of the new brands to be included by the company in FY16 for distribution in both Sabah and Sarawak.
With the potential of more brands added to KTC’s portfolio for distribution, AllianceDBS Research forecasted the group’s revenue to grow by 13 per cent in FY16 supported by the introduction of several personal care products and household product brands.
It observed that the gross profit margin of its own brands was 28.6 per cent which was higher than the distribution of third-party CPG brands of 12.95 per cent.
AllianceDBS Research believed the gross profit margin of KTC should increase if the company decides to further expand the distribution of its own brands relative to third party CPG brands in the future.
http://www.theborneopost.com/2015/11/13/sabah-based-ktc-has-sizeable-room-for-growth-analysts/#ixzz3vb8mOY9U
