What’s up for Lion Asiapac?
New Businesses
During the financial year, Lion Asiapac diversified into the limestone processing business. After the year end, Lion Asiapac also announced plans to embark on two other new business areas – automotive component trading and scrap metal trading.
Limestone Processing
Following the setting up of a limestone processing subsidiary in Malaysia, construction of a new plant in Banting, Selangor has commenced. The plant is expected to be operational by first quarter of 2007. It will produce and supply quicklime, which can be used in various industries. It will house a kiln with the production capacity of 600 tons of quicklime per day, or approximately 210,000 tons per year. Raw materials will be procured mainly from limestone quarries in Kinta Valley, Perak.
The Group’s strategy is to focus on supplying quicklime to Malaysian steel mills and the construction industry, which are experiencing tremendous growth to keep pace with the needs of industrialised cities for new buildings, facilities and infrastructure. However, there are also opportunities to extend supply to other quicklime consumers such as paper mills, water treatment plants, incineration plants, aqua farms and the agriculture industry.
Automotive Component Trading
Lion Asiapac will purchase automotive chassis and components from Anhui Auto for supply to a third party plant located in Kota Kinabalu in Sabah, Malaysia. There, the components will be assembled into vehicles such as light trucks for local distribution.
Lion Asiapac also intends to enhance its value of investment in Anhui Auto by assisting the company to expand its market coverage outside of the PRC. Anhui Auto is a major player of left-hand drive trucks in the PRC. By developing trucks for the right-hand drive market, there is potential for Anhui Auto to penetrate the Malaysia market and subsequently, other markets across South East Asia.
Scrap Metal Trading
In this business division, Lion Asiapac will act as a middleman, sourcing for scrap metal suppliers and arranging for scrap metal to be shipped directly from suppliers to buyers.
The investment in these businesses will provide fresh platforms from which to improve Lion Asiapac’s future profitability. However, during this period while Lion Asiapac establish their position and seek to secure contracts, the profit for financial year ending 30 June 2007 is expected to be substantially lower than in 2006.
Based on my research, quicklime is selling US$60-75 per tonn. Therefore with a annual capacity of 210,000 tonns, Lion AP will generate a US$12.6 million revenue. Using a gross margin of 50%, Lion AP will have a US$6 million profit. After misc expenses , Lion AP is expected to earn S$4 million or EPS of $0.01 based on this quicklime plant. Based on this, the quicklime plant is worth S$0.16.
With a net cash in postition, i believe Lion AP is worth much more than the current trading price of $0.185
New Businesses
During the financial year, Lion Asiapac diversified into the limestone processing business. After the year end, Lion Asiapac also announced plans to embark on two other new business areas – automotive component trading and scrap metal trading.
Limestone Processing
Following the setting up of a limestone processing subsidiary in Malaysia, construction of a new plant in Banting, Selangor has commenced. The plant is expected to be operational by first quarter of 2007. It will produce and supply quicklime, which can be used in various industries. It will house a kiln with the production capacity of 600 tons of quicklime per day, or approximately 210,000 tons per year. Raw materials will be procured mainly from limestone quarries in Kinta Valley, Perak.
The Group’s strategy is to focus on supplying quicklime to Malaysian steel mills and the construction industry, which are experiencing tremendous growth to keep pace with the needs of industrialised cities for new buildings, facilities and infrastructure. However, there are also opportunities to extend supply to other quicklime consumers such as paper mills, water treatment plants, incineration plants, aqua farms and the agriculture industry.
Automotive Component Trading
Lion Asiapac will purchase automotive chassis and components from Anhui Auto for supply to a third party plant located in Kota Kinabalu in Sabah, Malaysia. There, the components will be assembled into vehicles such as light trucks for local distribution.
Lion Asiapac also intends to enhance its value of investment in Anhui Auto by assisting the company to expand its market coverage outside of the PRC. Anhui Auto is a major player of left-hand drive trucks in the PRC. By developing trucks for the right-hand drive market, there is potential for Anhui Auto to penetrate the Malaysia market and subsequently, other markets across South East Asia.
Scrap Metal Trading
In this business division, Lion Asiapac will act as a middleman, sourcing for scrap metal suppliers and arranging for scrap metal to be shipped directly from suppliers to buyers.
The investment in these businesses will provide fresh platforms from which to improve Lion Asiapac’s future profitability. However, during this period while Lion Asiapac establish their position and seek to secure contracts, the profit for financial year ending 30 June 2007 is expected to be substantially lower than in 2006.
Based on my research, quicklime is selling US$60-75 per tonn. Therefore with a annual capacity of 210,000 tonns, Lion AP will generate a US$12.6 million revenue. Using a gross margin of 50%, Lion AP will have a US$6 million profit. After misc expenses , Lion AP is expected to earn S$4 million or EPS of $0.01 based on this quicklime plant. Based on this, the quicklime plant is worth S$0.16.
With a net cash in postition, i believe Lion AP is worth much more than the current trading price of $0.185
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