KUALA LUMPUR: Poultry outfit LTKM Bhd said it will not jump on the consolidation and expansion bandwagon, unlike its competitors over the past year.
Instead, its main focus for now will be on improving the efficiency of its core business in layer farming, managing director Datuk Tan Kok told The Edge Financial Daily in an exclusive interview recently.
“We are aiming to be the most profitable company rather the largest poultry company. We are still very focused on ensuring that we have efficient operations” said Tan.
“By managing our costs and productivity well, we will ensure that our profitability is sustained for the long term,” he added.
In the past five years, LTKM’s earnings recorded a compound annual growth rate (CAGR) of 31% from RM5.44 million in FY07 (ended March 31) to RM16.01 million in FY11.
In the same period, its revenue CAGR was 15%, from RM85.55 million in FY07 to RM150.49 million in FY11.
With an output of 1.4 million eggs per day, LTKM is considered the fifth largest egg producer in Malaysia. It exports 35% to 40% of its total production to Singapore and Hong Kong. Premium eggs, such as its LTK Omega Plus brand, make up for 20% of its total production.
LTKM’s sole 179ha farm in the district of Durian Tunggal in Malacca is the single largest centralised poultry farm in Malaysia, with layer hens in over 140 closed house systems.
Having all the poultry houses in one location improves efficiency, while its centralised location in Malacca is strategic for distributing eggs in the peninsula and across the causeway, said Tan.
Although LTKM has no current expansion plans, it will be on the lookout for opportunities, particularly in land acquisitions, he said.
However, the acquired land will unlikely be developed into poultry farms, but will be for investment purposes.
Tan said developing land into a farm is one of the main difficulties poultry companies face.
“LTKM’s plan to develop land into farms has been opposed by residents who live in the area, who worry about the smell,” he explained.
This scenario was faced by LTKM when it purchased 81ha of land in Bukit Senggeh, Malacca, back in 2003. As a result, LTKM has been using the land for sand mining since 2008, which contributed to around 2% of its revenue in FY11.
The more convenient way is to purchase existing poultry farms, said Tan. Still, LTKM is not in a hurry as its farm in Malacca is not yet fully occupied, allowing the company to build more chicken houses in the future. In the last two years, four chicken houses were added, increasing output by 100,000 eggs per day, said Tan.
LTKM has its own feedmill with a production capacity of 7,000 tonnes per month. Despite producing its own feed, Tan said costs remain the main challenge of the company.
Poultry feed, which accounts for 70% to 75% of cost of sales, is made mostly from corn and soyabean meal. To buffer against volatile prices, Tan said LTKM keeps the stock for three to four months, in addition to buying futures contracts.
LTKM has also started its maiden property development in Banting comprising 26 units of terraced houses. Tan said involvement in the small project is more to gain experience rather than profit. LTKM may consider expanding further into property development, he added.
In FY11, LTKM paid net dividends of 13 sen, which represented 35% of the year’s net profit.
At the closing price of RM1.82 last Friday, the net dividend yield came to 7.1%. LTKM has also been trading below its end-September book value of RM2.77. The stock was traded at 4.9 times FY11 earnings.
As at end-September, the company had cash reserves of RM10.1 million and short- and long-term borrowings of RM21.54 million.
For its 2QFY12 ended Sept 30, LTKM posted a net loss of RM6.73 million from a net profit of RM4.85 million a year ago, while revenue increased marginally to RM38.87 million from RM38.31 million previously.
LTKM said the loss was caused by ceasing its loss-making processed glass manufacturing business, which it started in January. Costs from the cessation and impairment losses from the disposal of machinery amounted to RM6.96 million.
Instead, its main focus for now will be on improving the efficiency of its core business in layer farming, managing director Datuk Tan Kok told The Edge Financial Daily in an exclusive interview recently.
“We are aiming to be the most profitable company rather the largest poultry company. We are still very focused on ensuring that we have efficient operations” said Tan.
“By managing our costs and productivity well, we will ensure that our profitability is sustained for the long term,” he added.
In the past five years, LTKM’s earnings recorded a compound annual growth rate (CAGR) of 31% from RM5.44 million in FY07 (ended March 31) to RM16.01 million in FY11.
In the same period, its revenue CAGR was 15%, from RM85.55 million in FY07 to RM150.49 million in FY11.
With an output of 1.4 million eggs per day, LTKM is considered the fifth largest egg producer in Malaysia. It exports 35% to 40% of its total production to Singapore and Hong Kong. Premium eggs, such as its LTK Omega Plus brand, make up for 20% of its total production.
LTKM’s sole 179ha farm in the district of Durian Tunggal in Malacca is the single largest centralised poultry farm in Malaysia, with layer hens in over 140 closed house systems.
Having all the poultry houses in one location improves efficiency, while its centralised location in Malacca is strategic for distributing eggs in the peninsula and across the causeway, said Tan.
Although LTKM has no current expansion plans, it will be on the lookout for opportunities, particularly in land acquisitions, he said.
However, the acquired land will unlikely be developed into poultry farms, but will be for investment purposes.
Tan said developing land into a farm is one of the main difficulties poultry companies face.
“LTKM’s plan to develop land into farms has been opposed by residents who live in the area, who worry about the smell,” he explained.
This scenario was faced by LTKM when it purchased 81ha of land in Bukit Senggeh, Malacca, back in 2003. As a result, LTKM has been using the land for sand mining since 2008, which contributed to around 2% of its revenue in FY11.
The more convenient way is to purchase existing poultry farms, said Tan. Still, LTKM is not in a hurry as its farm in Malacca is not yet fully occupied, allowing the company to build more chicken houses in the future. In the last two years, four chicken houses were added, increasing output by 100,000 eggs per day, said Tan.
LTKM has its own feedmill with a production capacity of 7,000 tonnes per month. Despite producing its own feed, Tan said costs remain the main challenge of the company.
Poultry feed, which accounts for 70% to 75% of cost of sales, is made mostly from corn and soyabean meal. To buffer against volatile prices, Tan said LTKM keeps the stock for three to four months, in addition to buying futures contracts.
LTKM has also started its maiden property development in Banting comprising 26 units of terraced houses. Tan said involvement in the small project is more to gain experience rather than profit. LTKM may consider expanding further into property development, he added.
In FY11, LTKM paid net dividends of 13 sen, which represented 35% of the year’s net profit.
At the closing price of RM1.82 last Friday, the net dividend yield came to 7.1%. LTKM has also been trading below its end-September book value of RM2.77. The stock was traded at 4.9 times FY11 earnings.
As at end-September, the company had cash reserves of RM10.1 million and short- and long-term borrowings of RM21.54 million.
For its 2QFY12 ended Sept 30, LTKM posted a net loss of RM6.73 million from a net profit of RM4.85 million a year ago, while revenue increased marginally to RM38.87 million from RM38.31 million previously.
LTKM said the loss was caused by ceasing its loss-making processed glass manufacturing business, which it started in January. Costs from the cessation and impairment losses from the disposal of machinery amounted to RM6.96 million.
