KYM: FY2024 a difficult year but export sales recovery seen in 3Q onwards

KUALA LUMPUR (July 5): KYM Holdings Bhd expects its financial year ending Jan 31, 2024 (FY2024) to continue to be challenging, amid continued volatility in paper roll prices, the rise in the overnight policy rate and the group’s foreign exchange exposure, according to newly appointed chief executive officer Darren Lee.

The group is dependent on paper rolls it sources from Northern Europe as its raw material, which means a lot of its purchases are denominated in euros and US dollars while the ringgit has been declining.

“It's a difficult year, but we are cautiously optimistic [about our financial performance].

“We see a recovery in 3Q and 4Q as we expect our export sales to pick up,” he told reporters after the group’s annual general meeting on Wednesday (July 5).

The industrial paper bag maker’s net profit more than doubled to RM11.37 million in the first quarter ended April 30, 2023 (1QFY2024) from RM4.69 million a year earlier, mainly due to a one-time gain on the sale of a piece of land and building.

Revenue wise, the group saw a decline to RM22.9 million from RM29.8 million, due to lower selling prices and sales volumes as the export market weakened.

Looking ahead, KYM aims to increase export sales for its multiwall industrial paper bags and gain more customers from overseas markets, said the CEO. The group’s exports amounted to 30% in FY2023, led by Indonesia (22%), Thailand (4%), and Singapore (4%).

“Export is an important strategy that I want to deploy as many countries have not moved to paper bags yet. We will intensify our business development and marketing activities to further increase sales volume and orders from existing and new customers. In the next few years, we will see 50%-50% for imports and exports,” he said.

KYM also plans to roll out its new sustainable and innovative product, its Top Daeration Plastic Free Film ESG Sacks, to the market in the second half of 2023.

Too early to talk about RE, EVs and tech venture

It is too early to reveal the group’s plans for diversifying its business into renewable energy (RE), electric vehicles (EVs) and technology sectors. Lee said.

The Edge reported last August that KYM was looking to venture into these three business segments in a bid to future-proof the business and effect a valuation shift.

"Looking at our current valuation right now, we are trading at a 21.5% discount to net assets per share of 65 sen. Price-earnings valuation is only less than six times. So I have to go raise cash for my maiden acquisitions. These plans actually take time [because] we scout the entire landscape and see where we can get the best value and returns,” he said.

As at end-April, KYM’s short-term investments, fixed deposits with licensed banks and cash and bank balances stood at RM23.155 million. Short-term borrowings were at RM27.78 million, while long-term borrowings totalled RM13.85 million.

KYM’s share price closed unchanged at 51 sen on Wednesday, valuing the group at RM77.83 million.