KUALA LUMPUR: Toyo Ink Group Bhd’s story on turning the ink maker into a power producer does not seem to sell well to the investing public.
The company, which announced the receipt of the letter of approval to build a US$2.5 billion (RM7.95 billion) power plant in Vietnam, succumbed to heavy selling pressure that pulled its share price to an intra-day low of RM1.53 yesterday, down 22.8% from its recent peak of RM1.88 recorded last Tuesday.
The stock managed to regain some lost ground in the last trading hour to end yesterday at RM1.70, with 35,900 shares transacted. Nonetheless, Toyo Ink’s share price has gained 37% from its year’s low of RM1.24.
To recap, Toyo Ink was granted a letter of award from the Vietnamese government for a power plant project in Hau Giang province in southern Vietnam.
According to the announcement to Bursa Malaysia, the approval letter from the Vietnamese government stated that it agreed to let Toyo Group (Malaysia) to conduct research and development of the Song Hau 2 thermo power plant project.
The power plant is expected to have a capacity of 2x1,000 MW.
The company’s venture has raised eyebrows as Toyo Ink is not in the power generation business, and the project will only see maiden earnings contribution in five years, at the earliest.
Its managing director Steven KC Song had indicated that it would take three to four years to build the plant and operations should begin in 2017 or 2018. If everything goes according to plan, Song expects return on investment in seven to nine years.
There are doubts on the venture as Toyo Ink has yet to be granted any power purchase agreement and to secure any financing facilities.
Toyo Ink’s balance sheet as at Sept 30 showed that the company’s borrowings were at about RM31.6 million, a large bulk being short-term debts. Its cash balance stood at RM1.78 million.
According to Song, the company will seek partners to raise capital and to bring in the expertise to build and operate the power station.
Song is optimistic about the prospects of undertaking the power plant project and said, “The Vietnamese are struggling with power supply issues.”
The company’s ink business has not fared well in the past two years.
For the six months ended Sept 30, Toyo Ink’s net profit fell more than half to RM402,000 from RM1.72 million in the previous corresponding period. Revenue shrank to RM48.3 million from RM57.4 million previously.
Toyo Ink’s net profit was down sharply to RM2.7 million or 6.35 sen per share from RM4.01 million or 9.38 sen per share for FY11 ended March 31, despite higher revenue at RM109.9 million compared with RM93.6 million the year before.
Even if the power project is a viable venture, shareholders will only see the benefits in 2017. Investors are probably more concerned over the company’s earnings prospect in the immediate future.
The company, which announced the receipt of the letter of approval to build a US$2.5 billion (RM7.95 billion) power plant in Vietnam, succumbed to heavy selling pressure that pulled its share price to an intra-day low of RM1.53 yesterday, down 22.8% from its recent peak of RM1.88 recorded last Tuesday.
The stock managed to regain some lost ground in the last trading hour to end yesterday at RM1.70, with 35,900 shares transacted. Nonetheless, Toyo Ink’s share price has gained 37% from its year’s low of RM1.24.
To recap, Toyo Ink was granted a letter of award from the Vietnamese government for a power plant project in Hau Giang province in southern Vietnam.
According to the announcement to Bursa Malaysia, the approval letter from the Vietnamese government stated that it agreed to let Toyo Group (Malaysia) to conduct research and development of the Song Hau 2 thermo power plant project.
The power plant is expected to have a capacity of 2x1,000 MW.
The company’s venture has raised eyebrows as Toyo Ink is not in the power generation business, and the project will only see maiden earnings contribution in five years, at the earliest.
Its managing director Steven KC Song had indicated that it would take three to four years to build the plant and operations should begin in 2017 or 2018. If everything goes according to plan, Song expects return on investment in seven to nine years.
There are doubts on the venture as Toyo Ink has yet to be granted any power purchase agreement and to secure any financing facilities.
Toyo Ink’s balance sheet as at Sept 30 showed that the company’s borrowings were at about RM31.6 million, a large bulk being short-term debts. Its cash balance stood at RM1.78 million.
According to Song, the company will seek partners to raise capital and to bring in the expertise to build and operate the power station.
Song is optimistic about the prospects of undertaking the power plant project and said, “The Vietnamese are struggling with power supply issues.”
The company’s ink business has not fared well in the past two years.
For the six months ended Sept 30, Toyo Ink’s net profit fell more than half to RM402,000 from RM1.72 million in the previous corresponding period. Revenue shrank to RM48.3 million from RM57.4 million previously.
Toyo Ink’s net profit was down sharply to RM2.7 million or 6.35 sen per share from RM4.01 million or 9.38 sen per share for FY11 ended March 31, despite higher revenue at RM109.9 million compared with RM93.6 million the year before.
Even if the power project is a viable venture, shareholders will only see the benefits in 2017. Investors are probably more concerned over the company’s earnings prospect in the immediate future.
