Eksons switches focus after reverse takeover

Source: The Star Publication, April 5, 2000, By Kathy Fong

KUALA LUMPUR: Eksons Corp Bhd, formerly known as Chongai Corp Bhd, has successfully completed its debt restructuring exercise, and its core business now has switched to plywood production as a result of a reverse takeover by Sarawak-based Rajang Plywood Sawmill Sdn Bhd.

Shares in the restructured company are expected to resume trading on the KLSE second board on April 12. They were last traded at RM1.34 before their suspension on Feb 17.

Eksons' newly-appointed group managing director Hsin Tay said that with the assistance of the Corporate Debt Restructuring Committee (CDRC), the complicated restructuring scheme involving a capital reduction, debt waiver and debt-equity conversion had been carried out smoothly in the months since February last year.

Eksons is the second company to have completed a debt restructuring with the assistance of the CDRC.

To better reflect its new business focus, Tay said the restructured company had assumed a new name and a new logo highlighting its timber-based activities.

Rajang Plywood, incorporated in 1989, is involved in the manufacture and trading of plywood, veneer and sawntimber. It operates a factory in Sungai Dasan in Sibu, Sarawak.

The major shareholders of Rajang Plywood are Singaporean Hsin Tay, Taiwanese Gau Maw Shyong and Malaysian company Serira Sdn Bhd.

Speaking at a media briefing in Kuala Lumpur yesterday, Tay said plywood manufacturing would be the main source of income for the company, and was expected to contribute more than 90% to total group earnings starting from its current financial year to March 31, 2001.

Group general manager Win Ong said: "Better earnings are expected for our current financial year. But given the volatility of plywood prices we do not want to speculate on the earnings figure."

He expects the plywood price to be above RM350 per cu m.

Rajang Plywood recorded a pre-tax profit of RM24.9mil on a turnover of RM163mil for its last financial year to Dec 31, 1999.

The strong profit was credited to higher productivity brought about by newly installed machinery and improved plywood prices.

Tay said the new management's immediate plan for the future was to expand the company's production capacity by setting up three additional production lines in the current financial year once a suitable location had been identified.

The cost of the expansion is estimated at between RM75mil and RM85mil. "We foresee no problem in financing the investment as there is zero gearing ratio (debt-free) on the company's balance sheet," Tay said.

Almost 100% of the plywood produced by Rajang Plywood is exported. China takes in some 80% of the exports. As for the company's long-term plan, Tay said Eksons might venture into the manufacture of fancy plywood because it offered higher profit margin.

He said fancy plywood, which is a higher value-added product, was in demand in Europe and the United States. Rajang Plywood is now supplying top quality 3mm plywood to China for fancy plywood production.

Eksons also has plans to venture into reforestation to ensure an adequate supply of raw materials.

On the group's garment-making activity, Ong said Eksons had no intention to dispose of it. He said the garment manufacturing business had been revitalised and had returned to the black.

With the completion of the restructuring scheme, Eksons' paid-up capital has increased to RM164.2mil from RM20mil previously. Its authorised capital is now at RM300mil compared with RM100mil formerly.

Tay said the subscription rate of more than 90% for the non-renounceable restricted offer for sale of Eksons shares made to shareholders reflected their strong confidence in the new management team.

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