In a filing with Bursa Malaysia today, EKA said that the MoU also includes the extraction of rice protein powder from its by-product, subject to commercial feasibility and financial viability studies to be conducted.
"The estimated cost and production capacity of the proposed production line will be determined upon completion of the relevant studies," read the group's announcement.
Pursuant to the MoU, HuiJia shall provide the technology transfer and support in producing liquid fructose in accordance to the needs of EKA's business, and EKA shall provide the relevant market information to HuiJia to facilitate the technology transfer, amongst others.
"[We] may visit HuiJia's factory and production facilities to understand its product's research and development and production process in relation to the technology transfer, [and we] shall finalise its specifications and needs in relation to the technology transfer within 180 days from the date of this MoU, and shall enter into a definitive agreement with HuiJia," said EKA.
The MoU is a culmination of EKA's long search for new, strategic business opportunities as well as the need to look for new and relevant product range which the company can leverage on its existing competencies, particularly on its experience and capabilities in sourcing and processing of broken rice.
Fructose is a nutritive sweetener made from, amongst others, broken rice by undergoing enzymatic processing, producing a sweetened compound containing higher levels of fructose. This is commonly used as sweeteners in various food items and drinks.
In the past year, the company has been actively looking for new, strategic business opportunities to expand and diversify its products range and other complementary businesses, and as an extension to its product range and as part of the group's long-term growth strategy in enhancing its earnings base, the group has identified liquid fructose as a new product.
Kedah-based EKA is of the view that the production of liquid fructose presents a good business opportunity for the group in view of the ready supply of broken rice in the northern region as well as the ready demand from the processed food and beverage industries in Malaysia and surrounding Association of Southeast Asian Nations (Asean) countries for liquid fructose.
"Rice protein powder, which is a by-product of liquid fructose production, can also be used as raw material for the production of animal feeds and therefore is expected to have wide ready markets in Malaysia and surrounding Asean countries in view of the sizeable agricultural and aquaculture industries in this region.
"The board is optimistic [about] the prospects of the production of liquid fructose as well as its by-products like rice protein powder extraction due to the new products' wide industrial applications and ready market in the region, as well as the new products' higher profitability margins and lesser competition compared to its existing product range," said EKA.
The group added that the production of liquid fructose and rice protein powder extraction, if successfully carried out, will provide EKA with an additional source of steady income.
EKA shares closed down 1.5 sen, or 11.11%, today at 12 sen, arriving at a market capitalisation of RM40.56 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.)
EKA (7182) - EKA Noodles inks MoU with China co to produce liquid fructose
http://www.theedgemarkets.com/my/article/eka-noodles-inks-mou-china-co-produce-liquid-fructose
EKA, EKA (7182), 7182, EN7182, KLSE:EKA, Investing,
