Export boon for Asia Poly

THINGS are looking up for cast acrylic sheet manufacturer Asia Poly Holdings Bhd as it rides on growth opportunities presented by the US-China trade war and the Covid-19 pandemic.

Since June 1, Asia Poly’s share price has run up almost eight times to 54 sen as of yesterday’s close, hitting an all-time high of 59 sen on Wednesday.

Asia Poly, which was loss-making over the past three years, reported a net profit of RM856,000 for the second quarter ended June 30.

Executive chairman Datuk Yeo Boon Leong says there is growing demand from the group’s export market, particularly in the US and the UK, due to trade diversion from China to Malaysia.

He said the US makes up one-third of the world’s consumption for acrylic sheets, which translates to US$1bil to US$2bil per annum.

“However, due to the additional 25% tariff for acrylic products exported from China, customers from the US are shifting their purchases of acrylic sheets from Malaysia instead.

“Malaysia has a lower tax on exports at an estimated 6.5%. In 2019, the US market accounted for 1% of Asia Poly’s sales, while the European market made up 2% of sales.

“For the financial year ending Dec 31,2020 (FY20), we expect the US and the UK markets to contribute 21% and 14% to group sales, respectively, ” he tells StarBizWeek.

On a quarter-on-quarter basis, sales from the US grew almost six times to RM2.1mil in the second quarter, while the UK market sales increased eight folds to RM2.04mil.

Acrylic sheets are widely used across various industries, ranging from food to transport, building, and medical industries.

Asia Poly is the only listed Malaysian manufacturer of cast acrylic sheets.

The group is currently running at a maximum capacity of 800 tonnes per month through two production lines out of its facility in Klang.

Yeo says the group has locked in orders up to next February.

Apart from the trade war, the Covid-19 pandemic has presented a new application for acrylic sheets.

The requirement for social distancing measures has seen greater adoption of acrylic for table partitions, face shields and shield boxes.

Going forward, Yeo expects further improvements in Asia Poly’s gross profit margins, on the back of an increase in average selling prices and a more efficient utilisation of its factory.

In the first two quarters of FY20, the group garnered gross profit margins of 13% and 22%, respectively, compared to 8% in 2019. Part of the reason is lower raw material costs.

“We manufacture our acrylic sheets using 100% virgin methyl methacrylate monomer (MMA). The MMA price has been on a downtrend, which helps us lower our production cost.

“As of June 26, MMA was priced at US$1,330 per tonne, ” says Yeo. This compares with a peak price of under US$2,750 per tonne in July 2018.

Given that both of Asia Poly’s production lines are currently running at full capacity, the group plans to add a third production line by June 2021.

The third production line, which is expected to run at full capacity in September 2021, will effectively increase Asia Poly’s manufacturing capacity to 1,600 tonnes per month.

It is interesting to note that the third production line will be a versatile one, with the ability to manufacture thicker acrylic sheets of up to 105mm.

The existing two production lines are able to manufacture acrylic sheets of up to 50mm.

“With the third versatile production line in place, we will be able to enter into a new niche segment – producing acrylic for swimming pools and public aquariums.

“Acrylic is favoured over glass given its durability, clarity and lightweight properties.

“Glass is 50% heavier than acrylic and has a clarity of only 82%, as compared to acrylic’s clarity of 92%, ” says Yeo.

Beyond Covid-19, Yeo is eyeing another segment with growth potential in the group’s export markets – the automotive industry.

The adoption of acrylic in automotive is growing as manufacturers aim to make cars as lightweight as possible.

For one, the rear windscreen and windows of a car can be fitted with acrylic instead of glass.

Apart from the clarity and lightweight properties of acrylic which make it a compelling substitute for glass, acrylic can be easily molded into any shapes.

Unlike glass, which requires specific moulds in the production process, acrylic sheets can be moulded to fit any measurements.

Besides the acrylic sheet manufacturing business, Asia Poly has ventured into the renewable energy business through the acquisition of an 80% equity in Dolphin Biogas Sdn Bhd (a subsidiary of Dolphin International Bhd) for RM2.12mil.

The acquisition, which is expected to be completed by the third quarter of this year, will serve to provide Asia Poly with a recurring net profit of RM2mil per annum, beginning from the fourth quarter of FY20, says Yeo.

In 2014, Dolphin Biogas had obtained the approval from the Sustainable Energy Development Authority Malaysia to sell electricity generated from its 2MW biogas plant for 16 years.

Incidentally, Asia Poly has sold its entire 49% equity in joint venture Asia Poly Food and Beverage Sdn Bhd (APFB) to Dolphin International for a total consideration of RM10.78mil, which will be satisfied in cash and issuance of new ordinary shares in Dolphin International.

APFB operates three Uncle Don’s restaurants and the company’s remaining 51% equity is held by Uncle Don’s Holdings Sdn Bhd (previously known as Frontier Touch Holdings Sdn Bhd).

In addition, Asia Poly is in the midst of developing a piece of land in Semenyih that will eventually provide recurring rental income of RM1mil per annum.

Earthwork and foundation works for the shop offices have begun and the development is due to be completed by end-2021.


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