L&P Global Expects RE Segment To Remain Intact, E&S To Gain Momentum

Boxes and crates remained as the key contributor to L&P Global (L&P)’s topline at 65% of quarter one 2023 revenue, followed by pallets at 32%, trading 2% and circular supply services 1%, said CGSCIMB in a recent report.

In terms of the geographical breakdown, Malaysia commands the dominant market, contributing 82% to the group’s quarter one 2023 sales while Vietnam at 18%.

In 2022, 68% of L&P’s revenue was derived from the renewable energy industry, 23% from electronics and semiconductor while the rest was made up by other sectors like pharmaceuticals, food, automotive and packaging.

“L&P recorded a 3-year (financial year 2019 to 2022) revenue compounded annual growth rate of 31%, mainly lifted by boxes and crates (48%) and pallets (15%) segments,” said CGSCIMB.

The improvement of both segments also underpinned the core profit after tax and minority interest compounded annual growth rate of 58%, after stripping out one-off listing expenses of RM2.7 million in 2022. Meanwhile, the group’s profit after tax and minority interest margin was relatively stable at a 4-year average of 11% across the financial year 2019 to 2022.

L&P’s revenue stood at RM38 million in quarter one 2023, which was equivalent to 25% of its 2022 sales. However, the group’s gross profit margin dropped by 4% points to 21% in quarter one 2023 as one of its major clients experienced machineries breakdown and facilities upgrade, which led to the deferment of orders for boxes and crates.

Post-listing, L&P has a net cash position of RM4.6 million as of 31 March 2023. L&P targets a dividend payout ratio of 20%-50% of its net profit.

“Note that the group CEO Ooi Lay Pheng is the company’s largest shareholder, holding 33.8% of B Pack Holdings Sdn Bhd. In the recent site visit to L&P factories in Penang, we understand that the company has completed the relocation part of the assembly activities from Sungai Bakap to Perai with new assembly lines installed in the Perai branch,” said CGSCIMB.

The space capacity for boxes and crates assembly has been bumped up by 134% to 811,569 cubic feet following the commencement of operations in Perai.

The utilisation rate of boxes and crates fell to 58% in quarter one 2023 as a result of the slowdown in the electronics and semiconductor industry.

On a positive note, the utilisation rate of engineered wood, solid wood and recycled pallet assembly increased to 88%, 86% and 52% respectively in quarter one 2023.

The company expects the electronics and semiconductor segment to regain momentum in second half 2023 while the contribution from the renewable energy segment remains intact. To recap, L&P expanded operations into Vietnam in financial year 2019 after they secured First Solar Vietnam Manufacturing Co Ltd as their customer.

First Solar Group of companies is one of the major clients who has over 13 years of business relationship with the company. L&P will also continue to explore and secure new multinational corporations customers in the electronics and semiconductor space and targets new projects in the medical/pharmaceutical industry.

“Key risks to the group include slower-than-expected recovery in the electronics and semiconductor industry, reliance on manual workforce, fluctuation in raw material costs and foreign currency,” said CGSCIMB.

The group announced on 13 June 2023 that it has proposed to transfer to the Main Market of Bursa Malaysia.

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