PRG ventures into timber logging to diversify revenue

KUALA LUMPUR (Oct 8): PRG Holdings Bhd, which is mainly involved in the manufacturing of webbings, furniture components, other fabric items, as well as the property sector, is now venturing into the timber export business as a means to diversify its revenue stream amidst an economic slowdown.

The loss-making group said its financial performance has been volatile due to the decline in sales of its elastic textile and webbings products as well as the slowdown in the Malaysian property development and construction industries.

Today, the group secured its shareholders' approval to buy two teak tree plantation lands, measuring 364.79 hectares, worth RM89.2 million, located in Kelantan, from Alifya Forestry Sdn Bhd.

The first land parcel in Jajahan Gua Musang (PT 4921), measuring 137ha, is an agriculture land with a 50-year leasehold period expiring on June 21, 2053. While, the second land parcel in Jajahan Kecil Lojing (PT 12), measuring 227.79ha, also has a 50-year leasehold that will expire on Aug 7, 2066.

"The board is of the view that the proposed acquisition represents an opportunity for PRG group to expand its revenue and profitability through the harvesting and logging of the teak trees already planted within the lands," PRG director of corporate affairs Hannon Cheah told reporters after the group's extraordinary general meeting earlier.

The acquisition will be satisfied via a combination of RM59.2 million cash, as well as the issuance of 40.3 million new shares at an issue price of 74.45 sen each amounting to RM30 million.

Cheah said PRG's unit PRG Agro Sdn Bhd has already received an offer from a local company to purchase timber harvested from the land.

"The estimated volume of timber on the lands is 150,000 cubic metres (based on raw log format) and it generates a potential value of RM180 million based on the value per cubic metre of RM1,200.00," he said.

Cheah added that the group is also looking into exporting harvested timber to China and India in the near future.

He said so far the group has obtained a Foreign Activity Permit to harvest the teak trees on one of the parcels of land, and will make a submission for a permit for the subsequent parcel in due course.

Prior to completing the harvesting of the teak trees, PRG Agro will evaluate market conditions and growth prospects before opting to either replant the lands with new teak trees or introduce new commercial crops, Cheah added.

At the midday break today, PRG shares added 0.52% or 0.5 sen to 96.5 sen for a market capitalisation of RM350.3 million.

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