Business

Friday July 17, 2009

Egg producer LTKM bullish on glass production venture

By SHARIDAN M. ALI


PETALING JAYA: Egg producer LTKM Bhd is confident its venture into glass production will be a success as it expects good demand from the construction sector, says managing director Tan Kok.

OSK Research, however, is less confident, saying the move poses risks.

Tan told StarBiz that there was huge demand for processed glass, including tempered, laminated, double-glazing and various security glasses, especially from the high-rise construction sector.

“Furthermore, we have an expert with 30 years’ experience in the glass industry to oversee the operation.

“We are also getting another expert from Germany to assist us in our new business diversification,” he said.

He added that the company expected its glass production facility in Klang to be operational in nine months.

LTKM has set up a unit, Lumi Secuglass Sdn Bhd, for its glass production business which involved an investment of RM15mil, of which RM12mil was borrowed.

Tan said the decision to diversify into glass-making was partly because the egg production business was capital intensive and had become saturated.

“The capital return is slow and production costs are high. Prices of raw materials such as timber, steel and cement for the construction of modern chicken sheds have gone up. Shortage of labour is another problem,” he said.

Meanwhile, OSK Research, in its latest report, is not enthusiastic about LTKM’s latest move.

It noted that the venture was unrelated to LTKM’s core business and that it could well pose risks, given the egg producer’s lack of expertise in the glass business.

“Given that the plant would take at least nine months for the installation of machinery before being commissioned, its earnings contribution is likely to be insignificant in the current financial year.

“Its balance sheet is still steady but net gearing is projected to rise to 0.3 times from 0.2 times due to the borrowings to fund the investment,” it said.


LTKM : [Stock Watch] [News]


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