South East Asian Chemical News

Focus: Selected SE Asian adhesive companies

Activities - OCI is the leading manufacturer of chemical adhesives and sealants in Malaysia.  It holds approved trademarks in China, Hong Kong, Thailand, Singapore, Taiwan, Vietnam and Malaysia.  63% of FY96 revenues were exported, while OCI accounted for 87% of Malaysia's total exports of adhesives and sealants in 1997.  

Product range - PU primers for shoe manufacture (OCI brand), and other chemicals for the shoe industry (OCI), Contact adhesives for furniture and building industries (OCI), Anaerobic adhesives for electronics and electricals, Blister pack tube adhesives for household (OCI, Turtle Wax), Silicone sealants and Cyanoacrylate adhesives for the auto industry (OCI, Orgaflex, Orgasil), Acetic cure sealants for construction (OCI, Orgasil, Acryfil, Sealgap), Super glue and other DIY products (OCI).  Strong R&D team, producing new product lines such as epoxy putty and second generation super glue.  The group also plans to produce WD40 multipurpose lubricant for local and export markets.   

Shareholder structure - IPO on the KLSE on January 16th 1998.  Shares offered at RM2.30 each, slightly oversubscribed (subscribed 1.03x).  Rose to premium (RM2.36) on day 1 of trading; now trading at RM2.46.  Listing coincided with visit of Michael Camdessus, which improved market sentiment.  Major shareholders are low profile / disguised: Nilai Mutiara (M) Sdn Bhd (18.5%), Oriental Nominee (Tempatan) Sdn Bhd (13.9%), BRG Holdings (M) Sdn Bhd (12.6%), Wang Ching Sen (12.6% declared). OCI has four subsidiaries: Witaco (trading in sealants and adhesives, car care products, safety shoes and dry cell batteries), Bosschem (trading in chemical products), OPI (trading in chemical products) and Topline (fashion apparels, footwear and accessories). 

Financials - For the year ended June 30th 1997, revenues were RM97.9m (US$24.8m), and pre tax profit was RM9.7m (US$2.4m).  Debt equity gearing is 80%.  The company is trading at a forecast P/E of 12x.   

Current trading - The group is actively reducing its reliance on imported raw materials (polymers, carriers and additives).  The export business is strong, while the domestic business remains weak.  

Other comments - Products sold to construction (40%), footwear (25%), automotive (15%), furniture and electronics sectors.  Repair and maintenance sectors are key, so the group is shielded to some extent from the downturn in new capital equipment sales and construction in Asia.  Competition is keen at the lower end of the market from importers of Taiwanese and Korean products.  Wang Ching Sen has expressed an interest in expanding the upstream, value added activities of the business.   
 

Activities - Tenco manufactures a wide range of industrial adhesives and industrial chemicals.  These products are marketed by Tenco's subsidiaries, principally within the ASEAN region.  Tenco is active both in trading and in manufacturing.  Tenco has a Canadian sales subsidiary and a Singaporean sales subsidiary.  10% of revenues have traditionally come from exports, although the company is currently trying to increase that percentage.   

Product range - Industrial Adhesives include hot melts, PVAc, EVAs, PVOH, acrylics, polychloroprene adhesives and fillers.  Industrial Chemicals include maintenance, institutional, janitorials, floor waxes, detergents, cleaning agents and general purpose cleaning chemicals.    
  
Shareholder structure - listed on the second board of the KLSE.  Subsidiaries include Westech (marketing company which sells to Malaysia/Brunei), Tenco Industries, Wilron and Tenco-Westech (marketing company which sells to Singapore).  

Financials - Group annual revenues for FY1997 were RM75m (US$19.0m).  Net assets RM30m (US$7.6m).  Revenues for the six months to September 1997 were RM37.4m (US$9.4m) (down 20%), with profit before tax of RM1.1m (US$0.27m) (down 47%) following higher operating costs and the depreciation of the Ringgit.  The company has undertaken cost cutting measures.  Once again, the directors recommended that no interim dividend be paid.  

Current trading - Business is holding up relatively well but conditions are becoming increasingly challenging, particularly given the reliance on imported raw materials (representing some 15%-20% of stocks).   

Possible deal structure - Tenco is looking for strategic partners who can provide new technology and new products for both upstream and downstream activities.  It may be possible to acquire a substantial or majority equity stake in some or all of the businesses. 

Other comments - On March 12th 1998, the KLSE queried the company on the substantial increase in its share price.  The company replied that it was unaware of any impending change in the major shareholders or of any reasons to account for the unusual market action.  Such "ramping" of a share price is not uncommon on the Second Board in Malaysia, where corporate activity is seldom transparent and disclosure by companies is poor by Western standards.  There have been rumors recently that Tenco is experiencing financial difficulties.   
 

Activities - The company manufactures adhesives, anti-corrosives, rubber products and sealants.  These products are marketed within ASEAN, but distribution is being expanded to include China. Operations include the manufacture and marketing of adhesives, sealants and undersealing products. 

Shareholder structure - Sime Chemical Products is a wholly owned subsidiary of DMIB Bhd, the tire, mattress and chemical manufacturer.  DMIB, one of Sime Darby’s five core subsidiaries, is in turn owned 51% by Sime Darby.  DMIB is listed on the KLSE.  

Financials - In 1997 Sime Chemical had RM13m in revenues (US$3.25m).  40% of revenues were attributed to products for the automotive industry.  DMIB posted 1997 revenues of RM268 (US$67m) and pre-tax profit of RM17.5 (US$4.4m).    

Current trading - The company is currently conducting trial sales in Indonesia and the Philippines to test the viability of marketing Sime Chemical’s products to the local auto industry in the two countries.      

Possible deal structure - Sime Chemical may look for strategic partners to provide technology and capital in its bid to become a major player in the automotive industry.   A foreign company could take advantage of Sime Chemical’s local distribution and sales network.   

Other comments - The company has adhesive and sealant factories located in Petaling Jaya.  Sime Chemical was established in 1968 and is one of the only local ASEAN players providing sealants and adhesives to the regional automobile industry.    
 

Activities - Kurnia Kapuas Utam Terbuka manufactures formaldehyde, thermosetting adhesive, high-pressure laminates, melamine paper and gummed tape. 

Shareholder structure - Soenaryo (16.28%), PT Bumi Raya Utama (11.01%), Hoare Govett Asia Ltd (9.76%), Investment International Ltd (6.35%), Dunway Holdings Ltd (6.00%).   

Financials - 1996 revenues of Rp81.4bn (US$6.3m).  

Current trading - Most of the company’s sales and distribution are within Indonesia.  Currently less than 5% of revenues are derived from exports.        

Possible deal structure - The company is looking to grow.  The management has indicated an interest in reactivating its production of powder glue and in expanding and diversifying its high-pressure laminate product line.  

Other comments - The company was the first thermosetting adhesive company established in Indonesia and remains one of the largest.  The company changed its name to the present form from PT Kurnia Lampuas Utama Glue Industry in April 1997.