KUALA LUMPUR: Daibochi Plastic and Packaging Industry Bhd (Daibochi) yesterday signed a memorandum of agreement (MoA) with Myanmar Smart Pack Industrial Company Ltd (MSP) to invest US$6.8 million (RM29.4 million) in its first joint venture (JV) to manufacture flexible consumer packaging outside of Malaysia.
Daibochi, through its wholly-owned subsidiary Daibochi Flexibles Sdn Bhd and MSP, will set up a JV company, namely Daibochi Packaging (Myanmar) Co Ltd (DPM) in Myanmar in which it will have a 60% stake.
MSP is a flexible packaging manufacturer in Myanmar.
The JV would be Daibochi’s first manufacturing facility in a foreign country as it taps into the consumer packaging market in Southeast Asia.
The JV’s operations will be conducted at MSP’s flexible packaging factory in Yangon, Myanmar.
In the press conference yesterday, managing director Thomas Lim Soo Koon said after securing the approval from the Myanmar Investment Commission, he expects the JV’s operations to start within the next three to six months, along with a three-year or five-year tax exemption status.
He also said DPM is targeting 30% of export sales from the plant within three years of operation. MSP currently serves the local market.
For Daibochi, its export sales are expected to increase from 55% to 65% within three years from the setting up of the JV.
In addition, Lim added that with Myanmar’s low manufacturing and labour costs, Daibochi’s know-how and customer base, MSP’s turnover of US$8.8 million per annum and capacity utilisation of 50% are expected to double up within the next three years of operation via the JV.
Daibochi’s investment would be made through a combination of internally generated funds and bank borrowings, at a ratio to be determined at a later stage.
“Most probably, [the] majority of the investment will be from bank borrowings,” Lim told The Edge Financial Daily.
On the other hand, MSP would inject its entire plant assets and production equipment into DPM for the remaining 40% stake.
According to Daibochi’s statement yesterday, DPM would invest an additional capital expenditure of US$5.5 million via internally generated funds over a three-year period to enhance production capacity, quality and efficiency.
“DPM would assume supply of packaging products to existing customers of MSP and is expected to contribute positively to Daibochi’s consolidated profit within the first full year of operations,” it said.
Daibochi has two plants in Ayer Keroh and Jasin, Melaka.
Source: The Edge Markets
