Posted by kk123 > 2016-11-03 09:40 | Report Abuse

**Source: http://www.thestar.com.my/business/business-news/2016/11/03/lay-hong-eyes-dnonce/ PETALING JAYA: Integrated eggs and poultry player Lay Hong Bhd is said to be looking to take up a controlling stake in D’nonce Technology Bhd, a supplier of packaging materials that is going into the frozen food segment. The acquisition is said to involve a significant stake because the eggs and poultry company is seeking to play a meaningful role in expanding its business, said sources. It is learnt that Lay Hong would build up a stake in D’nonce through a combination of a private placement exercise and the acquisition of an existing block from one of the existing shareholders. Towards this end, D’nonce has already announced a 20% private placement that Lay Hong is likely to participate in. The 20% private placement entails the issuance of 36.08 million new shares, together with 18.04 million warrants on the basis of one warrant for every two placement shares. “It is likely to be a two-step exercise that will pave the way for Lay Hong’s entry into D’nonce,” said a source. Specifically, Lay Hong is eyeing D’nonce’s packaging business, an area that is of interest to the company after the entry of NH Foods Ltd of Japan as a strategic shareholder last year. Following the entry of NH Foods, which is Japan’s largest meat packing company, Lay Hong embarked on the frozen food business and is in the midst of launching its first batch of frozen food products with a strategic partner. Sources said that Lay Hong believes that there is a lot of optimism in the food products business, where the trend is moving towards producing ready-to-eat food. The quality of food packaging is increasing in importance, especially in Malaysia where polystyrene containers have been banned from state government offices and functions. NH Foods, which is also the fifth largest in the world by sales, took up a 21.77% stake in Lay Hong last year. Following that, the two set up a joint-venture (JV) company, NHF Manufacturing (M) Sdn Bhd. The first batch of their products will entail five types of frozen processed chicken products, to be marketed under the Nippon Premium Nutriplus brand. It should be launched before year-end. It’s easy to fathom why Lay Hong is buying into D’nonce as the latter does all sorts of packaging, whether for paper or plastic products. It also does packaging design, packaging converting and corrugated cardboard making. D’nonce’s other core businesses include contract manufacturing, supply chain management and polymer engineering products. The loss-making D’nonce presently has a market capitalisation of only RM49.6mil, consisting of 180.4 million shares and a book value of 36 sen per share as of Aug 31, 2016. Shares in D’nonce are up some 10.5 sen to 29.5 sen on a year-to-date basis. Looking into the company’s annual report, the jewel of D’nonce could lie in its list of properties. As of August 2015, the company owned property valued at some RM40.97mil. At present, D’nonce has current net assets of approximately RM66mil. Based on the list of properties, this estimated value will increase by some RM34mil, hence increasing the company’s net assets to approximately RM100mil. Taking this into account, this would increase the book value of the company from 36 sen to 55 sen per share. The single largest shareholder in D’nonce is Law Kim Choon, who is also the chief executive officer and group managing director of the company. This is followed by Sunrise Paper Sdn Bhd with a 4.73% stake and Ho Yu Min with 2.77%. Meanwhile, NH Foods has huge plans to enhance its business presence in South-East Asia through the JV with Lay Hong. Other than fresh meats and processed foods such as ham and sausages, the company offers marine and dairy products. To-date, Lay Hong’s stable comprises nine layer farms, 19 broiler farms, three hatcheries, four breeder farms, two feed mills, one egg tray plant, four chicken-processing plants, a liquid egg plant, four organic fertiliser processing plants, 16 supermarket stores and 30 pasar mini (mini markets).