KUALA LUMPUR (Jan 7): SYF Resources Bhd ( Valuation: 1.10, Fundamental: 1.10) is confident that the double-digit growth momentum in its bottom line will continue in the next two years, driven by new and existing property developments which it believes are in rental hotbeds, while its furniture business has found its niche with resource maximisation throughout the value chain.
After SYF Resources’ annual general meeting today, executive director Datuk Seri Chee Hong Leong said the group will be launching property projects worth some RM500 million in gross development value (GDV) over the next three or four years.
In this financial year ending July 31, 2016 (FY16) alone, SYF already has RM200 million worth of unbilled sales.
SYF Resources’ property development division was initially used to generate funding for its furniture segment’s growth after the group’s restructuring exercise in the early 2010s, but property sales have in turn become the group’s biggest earnings driver, said Chee.
In FY15, 52.27% of SYF Resources’ pre-tax profit of RM16.34 million came from its property development business. In 1QFY16, its net profit grew by 110.17% year-on-year to RM10.83 million, mainly because its property development segment’s pre-tax profit multiplied by nearly five times to RM6.65 million.
“We are launching our Lavender Residence in Bandar Sungai Long soon. That already has a big captive market for investors seeking rental income, with a lot of students needing accommodation there,” Chee told reporters.
As for its furniture business, Chee credited SYF Resources’ executive chairman and chief executive officer Datuk Seri Ng Ah Chai for adding the upstream business to SYF Resources’ value chain four years ago, which has enabled SYF Resources to “secure” its own space in the furniture industry and gain competitive advantages.
“We have two business units in our new upstream plant. Kiln dried timber and whatever that is left, we will use them for particle board or density board. Thus, there is no waste in raw materials.
“We sell the timber to local and foreign players and the balance [is used] for our own furniture manufacturing (downstream segment). This is the same as our boards segment, where we sell them to local furniture players and also for our own usage,” Chee explained.
While the boards segment made marginal pre-tax profit of RM987,000 on revenue of RM10.96 million in 1QFY16, Chee said SYF Resources will increase its overall capacity, as it will have three plants by FY17.
“We already have the first factory (for boards segment). The second plant will be fully on stream in the middle of this year, while our third plant is coming in FY17. So, we are going to have three plants in the board area, where each plant has the capacity of between 80,000 (cubic metre) cu m and 100,000 cu m.
“If all three run on full steam, the boards segment should generate about RM140 million revenue (annually), although some of the boards will be used for our own,” said Chee.
SYF Resources, which reached a 10-year high of 70 sen on Tuesday, closed at 66.5 sen today, valuing it at RM415.6 million.
(Note: 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.)
http://www.theedgemarkets.com/my/article/syf-resources-confident-maintaining-double-digit-earnings-growth
