White Horse to turn unit around

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KUALA LUMPUR: Ceramic and tiles manufacturer White Horse Bhd, which bought over White Horse Ceramic Industries (Vietnam) Co Ltd (WHV) late last year, aims to turn around the loss-making Vietnamese unit by next year.

“Since we completed the acquisition of WHV, the company has been restructuring its product mix and marketing strategy. Barring unforeseen circumstances, the Vietnamese operations are expected to turn around in the next 12 months,” chairman and managing director Liao Yuan Shun told The Edge Financial Daily.

WHV, with a tile production capacity of approximately 12.65 million square metres per annum,  sells its products domestically and internationally, according to its annual report.

For the six months ended June 30 (6MFY14), the Vietnamese unit reported RM23.86 million in revenue, with a net loss of RM2.8 million. Still, White Horse’s net profit rose 5.1% on-year to RM29.17 million, while revenue rose 16% to RM357.5 million in the same period.

“[But with] the threat of rising production costs, we [also] face challenges in our pricing strategy to compete with international players. However, we shall focus on distributing better margin products in the international market such as bigger glazed porcelain and soluble salt tiles,” Liao said.

The group last increased its selling price across the board by 5% in January this year.

Liao said the group continues to invest and upgrade its manufacturing process to maintain and improve its margins, whose efforts have contributed significantly thus far.

Its net margin, which dropped from 12.7% in FY09 to 6.6% in FY12, picked up again to 7.5% in FY13. The figure is now 8.2% in the cumulative six months of this year (6MFY14) and Liao expects to see even better margins in the second half of the year.

Demand for White Horse’s tiles is largely linked to property development and there is much competition on the local front but Liao said prospects are still good in the southern region.

To cater to the influx of demand coming from the south, White Horse has allocated RM35 million to buy land and construct another warehousing facility in Johor, which will be ready next year.

Going forward, Liao said the delivery of local residential and commercial projects in the next two years will be the key growth factor for the group.

“The prospects are good, especially in the southern region. Our marketing strategy has been focusing on maintaining a close relationship with leading developers and architects,” he noted.

And Liao expects exports to continue to account for 15% of group revenue in tandem with growth in domestic sales.

The group has secured projects for hotels, residential and commercial sectors in the Middle East and South Asia, he said.

Based in Pasir Gudang, Johor, 65% of White Horse’s revenue comes from its direct distribution network supported by nearly 1,000 dealers. The remaining 35% is from project sales. Ceramic wall and floor tiles contribute 37% to group revenue, with porcelain tiles at 42%, and the higher-margin multi-effect and soluble salt tiles at 21%.

“We maintain a positive outlook for this year. So far the figures up to the second quarter have been encouraging,” Liao said, noting that the first quarter of the year is usually its “low season” in terms of sales.

White Horse, which closed nine sen up to RM2.10 last Friday with a market capitalisation of RM461.09 million, trades at 8.8 times price to earnings based on annualised FY14 earnings per share of about 24 sen. The stock yields 4.8% based on dividend per share of 10 sen it paid out last year.

“We have been paying an interim dividend of 5% and a final dividend of 5% for the past few years. We will try our best to maintain this,” said Liao, who has direct and indirect interests  of 0.46% and 12.67% in the company, respectively.

Lembaga Tabung Haji is its largest shareholder with a 9.8% direct stake as at April 15.

As at June 30, the group had a net debt of RM65.6 million, with retained earnings of RM481.7 million.


This article first appeared in The Edge Financial Daily, on October 20, 2014.