Yi-Lai sees boost in earnings with new owners in driving seat

by **Cals** Tue 26 Aug 2014, 09:16

Business & Markets 2014

Written by Wei Lynn Tang of theedgemalaysia.com

Monday, 25 August 2014 09:24

KUALA LUMPUR: Hampton Capital Pte Ltd, which has emerged as a substantial shareholder of Yi-Lai Bhd with a 31.12% stake on May 23, bought into the ceramic tiles manufacturer on grounds that it is profitable and is in a position to ride on the development activities in the Iskandar region.

When contacted, newly-appointed executive director Aaron Tan, who is linked to Hampton Capital, said Yi-Lai has sound fundamentals, having been established for over 20 years. He, however, declined to comment on whether there are any new strategies for Yi-Lai or its plans, stating that the group is “not ready to comment” yet.

Yi-Lai, with its factories in Senai-Kulai, Johor Baru, anticipates to continue to secure more project orders in the Iskandar region. It recorded its highest-ever revenue last financial year ended Dec 31, 2013 (FY13) at RM158.12 million, compared with RM111.05 million in FY09.

In the past four years, net profit grew from RM11.8 million in FY09 to RM12.6 million in FY13, with profit before tax (PBT) margins at between 10.1% and 15% in the period, and net margins ranged 8% to 11.7%.

It is worth noting that Tan, 30, is the son of Tony Tan Choon Keat, who is the non-independent non-executive director of IGB Corporation Bhd. Choon Keat is part of the larger Tan’s family who controls property giant IGB.

Tan, along with Singaporean Wendy Kang, have substantial shareholding in Hampton Capital and thus indirectly hold 31.12% in Yi-Lai. Hampton purchased this stake in an off-market deal from Yi-Lai’s founding Lim family on May 23.

Lim Oon Kok, 70, former managing director of Yi-Lai, disposed his 28.54% stake while his daughter Lim Yun-Li, a director, disposed her 2.58% stake in the company at RM1.30 per share.

There were a series of boardroom changes in the company following the shareholdings change.

On June 5, Tan was appointed executive director of Yi-Lai, while Kang was appointed non-independent non-executive director. Oon Kok resigned from being managing director on June 5, a post he held since December 2001.

Tan said that the process of selecting an executive committee —in which he chairs — is currently in the works.

While it remains to be seen what the new major shareholder has in store for Yi-Lai, the company’s second quarter results released last Thursday continued to show a growth in performance as net profit rose 19% year-on-year to RM4.48 million.

Revenue for the quarter grew 5.1% to RM43.62 million, which the company attributed to better sales performance.

Notably, Yi-Lai has zero borrowings and had a net cash of RM43.94 million as at June 30.

In the past one year, the stock has risen 44.5% from 80.3 sen to its closing of RM1.16 last Friday, giving it a market capitalisation of RM185.12 million.

Based on Yi-Lai’s closing price last Friday, the company trades at a price to earnings ratio of 14.2 times to its FY13 earnings per share of 8.15 sen. It yields 6.9% based on dividend per share of 8 sen last year.

Yi-Lai, which is registered as the proprietor of the Alpha Tiles trademark, has been paying a dividend per share of 6 to 8 sen in the past five years, yielding about 8.2-8.6% consistently. It has yet to declare any dividends for the first half of this financial year.

For the first six months ended June 30, 2014 (1H14), the company reported a 19.4% increase in net profit to RM6.75 million, on the back of a 5.9% increase in revenue to RM82.81 million.

The ceramic and homogeneous tiles manufacturer acknowledged that the operating environment is becoming increasingly challenging with the hike in electricity and natural gas tariffs, and intense competition amongst local tile manufacturers and from imported tiles, it nonetheless said it is preparing to meet the challenges ahead.

In the 2013 annual report, chairman Zabidi Md Zain said the company has added new lines of state-of-the-art tile manufacturing facilities which are capable of producing high resolution tile prints, and will be launching new value-added concepts for its products in the coming year.

This article first appeared in The Edge Financial Daily, on August 25, 2014.