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IR Adviser :

[Malaysian Reserve] Daibochi To Invest RM29.5m In Myanmar JV

Mark Rao

Daibochi Plastic and Packaging Industry Bhd will invest US$6.8 million (RM29.5 million) to form a joint venture (JV) with Myanmar Smart Pack Industrial Co Ltd (MSP) and tap into Myanmar’s emerging flexible packaging industry.

Daibochi chairman James Edwin said the deal would also take advantage of Myanmar’s low manufacturing cost and high labour supply.

Under the memorandum of agreement (MoA) signed yesterday, the flexible packaging manufacturer and distributor will retain a 60% stake through its wholly owned subsidiary, Daibochi Flexibles Sdn Bhd, in the JV to be called “Daibochi Packaging (Myanmar) Co Ltd” (DPM).

Edwin said the South-East Asian region is an opportune venture for the group because of its more than 600 million population and the rising affluence spurred by economic development.

“Myanmar, in particular, has captured our attention following the recent liberalisation of its once-closed economy and pro-business government policies in order to spur economic acceleration.

“We believe that Myanmar is at the cusp of a tremendous growth story,” he said in his speech during the MoA signing in Kuala Lumpur yesterday.

According to market intelligence provider PCI Wood Mackenzie, Myanmar’s flexible packaging market was valued at US$40 million in 2014, while it is projected to grow by 22% annually over the next five years compared to only 6% in previous years.

Under the JV agreement, Daibochi will provide the necessary equipment to expand MSP’s product range from home personal care, to include food and beverage products as well.

Meanwhile, MSP will inject its entire assets of plant and production equipment into the JV, representing the remaining 40% stake.

The JV is further projected to earn over US$8 million in revenue for its first year upon commencement of its operations.

“This JV with MSP is certainly timely, as it allows Daibochi to gain a first-mover advantage to tap into the vast potential in Myanmar,” Edwin said.

“At the same time, DPM would benefit from a host of synergies in terms of product range, technical know-how, labour supply and raw material procurement, which would enhance our competitive edge.”

Meanwhile, Daibochi MD Thomas Lim Soo Koon said the JV will utilise the low manufacturing costs in Myanmar as an export base for the South-East Asian markets.

“The main objective is to tap into the fast growing Myanmar market. However, because of Myanmar’s lowcost base, we see an opportunity to export out of the country to customers that we are familiar with.

“Due to the high-cost base in Malaysia, we cannot tap into those markets otherwise,” Lim noted.

He said the JV will be driven mostly by its Myanmar base for the next three years, with over 70% allocated for the import market.

The export ratio is expected to increase after this period. Currently, 55% of Daibochi’s sales stems from export markets.

Daibochi is planning to invest an additional US$5.5 million over the next three years in capital expenditure, generated exclusively from internally generated funds.

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