LY Corporation Limited - DBS Research 2018-01-25: IPO Factseet

LY Corporation Limited - DBS Vickers 2018-01-25: IPO Factseet LY CORPORATION LIMITED 1H8.SI

LY Corporation Limited - IPO Factseet

  • Offer Price: S$0.26
  • Share Offer: 75.85m placement shares (61.2m new and 14.7m vendor shares)
  • Market Cap: S$127.2m
  • Close Date: 29 Jan 2018 at 12.00 noon
  • Share Trading: 31 Jan 2018 at 9.00 a.m.
  • Sponsor, Issue Manager and Placement Agents: UOB Kay Hian



Business

  • LY Corporation and its subsidiaries are one of Malaysia’s leading manufacturers and exporters of wooden bedroom furniture. With approximately 40 years of track record in the furniture industry, the Group is an established original design manufacturer (“ODM”) principally engaged in the design and manufacture of custom wooden bedroom furniture, and the manufacture of wooden bedroom furniture which may be tailored to customers’ specifications and requirements on an original equipment manufacturer (“OEM”) basis.
  • As of 15 December 2017, LY Corporation operates from 15 factories and warehouses, occupying a combined built-up area of approximately 1.4 million square feet. Its products are sold mainly to overseas dealers such as furniture wholesalers and retailers.


Competitive Strengths


Established track record in the furniture industry

  • LY Corporation has an established a track record of approximately 40 years in the furniture industry, acquiring long-standing relationships with customers and agents.

Strong in-house design and development capabilities

  • LY Corporation has an in-house design team and aims to continually introduce unique and innovative designs.

Established subcontractor network

  • LY Corporation has developed strong and long-standing business relationships with its subcontractors over the years.

Consistently strives to be cost-competitive and efficient

  • LY Corporation incorporates automation into production processes and has implemented an integrated process management system (LY-6M) to enhance productivity and efficiency.

Business Strategies and Outlook


Expand sales network in the PRC

  • Due to the quality and the competitive prices offered, the Group believes there is high demand for its products in the PRC, and hence would like to expand its sales network there.

Upgrade machinery and equipment and acquire new technology

  • LY Corporation intends to invest in new technologies and to upgrade its machinery and equipment to increase productivity and achieve cost efficiency.

Construction of additional facilities

  • LY Corporation plans to enhance manufacturing and service capacity and capability by possibly acquiring new premises.

Explore investments, mergers and acquisitions, joint ventures and/or strategic collaborations

  • LY Corporation intends to expand and diversify its operations through investments or potential mergers and acquisitions, joint ventures and/or strategic collaborations.


Prospects


LY Corporation has observed the following trends, based on its operations:

  • Demand for wooden furniture manufactured in Malaysia is expected to grow.
  • Strong demand from the US
  • Potential demand growth from PRC.
  • Support and incentives from the government and industry associations for Malaysian furniture manufacturers to boost productivity.


Key Risks


Exposed to foreign exchange risks

  • The Group’s revenue, purchases are denominated in USD and RM. Fluctuations in the exchange rates would affect its profitability.

Dependent on the US market

  • Around 90% of the revenue is derived from customers based in the US. The Group’s revenue may be affected by changing economic, political, social or regulatory requirements and the demand for wooden bedroom furniture in the US.

Requires various licences, permits, approvals and certificates to operate business

  • Any failure to comply with the various laws and regulations governing the wooden furniture manufacturing in Malaysia may impact the growth of its business.

Affected by fluctuations in the costs of ancillary products and raw materials

  • The costs of ancillary products, raw materials, components and parts may fluctuate due to factors such as changes in market supply and demand.

Does not have long-term contracts with customers

  • While LY Corporation has established long-term business relationships with customers, the Group generally does not commit to long-term purchase contracts.


Dividend Policy

  • LY Corporation intends to distribute a special dividend of 3.0% of the Placement Price for FY2017 and to distribute at least 40.0% of the net profits attributable to shareholders for FY2018, FY2019 and FY2020.


IPO Documents








Singapore Research DBS Vickers | http://www.dbsvickers.com/ 2018-01-25
DBS Vickers SGX Stock Analyst Report NOT RATED Maintain NOT RATED 99998 Same 99998



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