Management Discussion & Analysis
Dear valued shareholders,

It is my privilege to present to you the sterling report card of Daibochi Plastic and Packaging Industry Berhad (Daibochi or the Group) in the financial year ended December 31, 2017 (FY2017), as we made good our intention to expand the breadth of our operational capability and customer reach.

Our diligent efforts in this regard have culminated in the successful commencement of our consumer packaging plant in Yangon, Myanmar on July 1, 2017 through Daibochi Packaging (Myanmar) Company Limited (Daibochi Myanmar), and marks a new era of growth for the Group.

Owing to the Management and operations teams’ commitment, the integration process of Daibochi Myanmar into the overall group operations reported smooth progress. This enabled Daibochi Myanmar to contribute positively to our financial performance since the third quarter of 2017.

Beyond serving the requirements of the local market, Daibochi Myanmar is positioned to become a major producer of high-quality packaging in Myanmar. To this end, in October 2017, the plant secured the ISO 9001:2015 accreditation and the Hazard Analysis and Critical Control Point Food Safety Management System (HACCP FSMS) certification. These quality and food safety certifications now allow Daibochi Myanmar to enter the qualification process with multinational corporations (MNCs).

In December 2017, Daibochi Myanmar secured approval from the Myanmar Investment Commission (MIC) to export goods outside of Myanmar. In the same month, the Myanmar plant delivered seven containers of flexible packaging to various customers in Malaysia, highlighting Daibochi Myanmar’s low-cost advantage that enables it to target cost-sensitive regional customers.

Additionally, Daibochi Myanmar received notification from the MIC in December 2017 on the commencement of its 5-year income tax waiver from November 22, 2017. The tax waiver complements the Group’s strategy to reinvest profits into Daibochi Myanmar over the next few years to enhance its manufacturing operations by investing in machinery and capacity upgrades.

Financial Review

These operational milestones, alongside nurturing the growth of existing clientele and enhancing efficiency, enabled Daibochi to achieve strong expansion in financial performance. The Group delivered its best-ever revenue of RM388.6 million in FY2017, growing 4.7% from RM371.2 million in the previous year, mainly attributed to contributions of RM14.9 million from Daibochi Myanmar in the third and fourth quarters of 2017.

Export revenue remained the major topline contributor with RM213.0 million in FY2017, increasing 4.4% from RM204.0 million previously, due to contributions from the new Myanmar plant. The growth in exports was muted by temporary disruptions to a key customer’s manufacturing line in the Philippines in the second quarter of 2017, which has since resumed operations. Export sales made up 54.8% of total Group revenue in FY2017, largely unchanged from 55.0% a year ago.

Meanwhile, domestic sales made up the remaining RM175.6 million of FY2017 group revenue, increasing 5.0% compared to RM167.2 million in the past year from increased orders from various F&B customers.

Group operating profit increased 15.3% to RM37.6 million from RM32.6 million previously attributed to new contributions from the Myanmar plant, better sales mix, improved operating efficiency and better wastage control. Similarly, group profit before tax (PBT) rose 19.3% to RM35.7 million from RM30.0 million in the past year in line with the better performance in operations, together with higher contribution from an associate which is engaged in property development amounting to RM1.2 million compared to RM0.1 million previously. Daibochi Myanmar recorded a PBT of RM3.5 million in FY2017.

Group net profit attributable to owners of the company was 5.9% higher at RM26.0 million compared to RM24.5 million in the past year in line with the higher topline and PBT. The growth in profit was partially offset by a higher effective tax rate, due to lower reinvestment allowances compared to the previous year.

Group shareholders’ equity rose 6.2% to RM200.9 million from RM189.2 million previously. The Group saw an increase in borrowings to RM69.9 million at end-FY2017 compared to RM54.0 million at end-FY2016, mainly to fund the acquisition of its 60% interest in Daibochi Myanmar and higher working capital requirements on increased business volume.

Net gearing stood at 0.26 times at end-FY2017, up from 0.20 times at end- FY2016. Even so, the net gearing remains at a conservative level, and provides the Group with a significant degree of flexibility.

Corporate Development

On June 28 2017, Daibochi completed the following corporate exercise:

  • 2-for-10 bonus issue of 54.6 million new ordinary shares, and
  • 1-for-10 free warrants issue of 27.3 million 5-year warrants with exercise price of RM2.50.

Upon completion of the bonus issue of shares, the Group had a total of 327.9 million shares listed on the Main Market of Bursa Malaysia Securities Berhad, with an enlarged share capital of RM163.9 million.

Capital Expenditure

The Group incurred RM4.4 million in capital expenditure in FY2017 mainly for the acquisition of new machinery and equipment.


The Group paid four interim single-tier dividends to shareholders in respect of FY2017 amounting to a total of 4.55 sen per share, after adjusting for the bonus issue of 2 shares for every 10 ordinary shares, which was completed on June 28, 2017. Total dividend payout amounted to RM14.9 million, representing 61.6% of FY2017 net profit excluding contributions from Daibochi Myanmar.

Effective from FY2017, the Group’s dividend policy was revised to distribute at least 60% of group net profit to shareholders, excluding net profit contributions from Daibochi Myanmar. This will allow Daibochi Myanmar to reinvest earnings to place Daibochi Myanmar on a stronger footing by enhancing its capacity and capabilities in building its market presence in Myanmar and Southeast Asia (SEA).

Growth Strategies

Daibochi will continue to take measures to boost its presence in SEA as well as the Australia and New Zealand (ANZ) region. In addition to efforts in growing the topline, the Group will also maintain stringent control on costs to further enhance its bottom line performance.

The following steps outline how Daibochi aims to achieve stronger growth in the financial year ending December 31, 2018 and onwards:

  • Achieving greater exports to SEA and the ANZ region
    The Group is set to commence delivery of flexible packaging in pouch form – a higher value product- to a MNC customer for its FMCG brand in the ANZ region and Thailand in mid-2018. This contract reflects positively on our capabilities in delivering innovative solutions that creates value for our clients.

    The Group is also working towards commencement of exports to a major MNC F&B customer in Indonesia.

    We are committed to building our profile in SEA and the ANZ region, and leverage on opportunities to supply packaging for renowned consumer brands.

  • Pursuing growth at Daibochi Myanmar
    Daibochi Myanmar is eyeing further market share in the F&B and FMCG sectors in Myanmar, as flexible packaging demand typically accelerates in line with uptrend in consumer spending and affluence. In this regard, our Myanmar operations has an exciting opportunity of proximity to regional countries to target new business in the region.

    The Myanmar plant has already commenced supply to several local companies, including a prominent beverage company in the country. Going forward, Daibochi Myanmar is currently actively engaged in various stages of talks to secure contracts from new customers as well as larger orders from existing clients to expand its product portfolio.

    There are also opportunities to transfer technology and expertise from our Malaysia operations to the Myanmar plant. For instance, the ability of Daibochi Myanmar to procure high-speed film from our Malaysia operations was crucial in securing a contract with a major beverage brand in Myanmar.

    Daibochi Myanmar’s low-cost manufacturing base arising from efficient plant operations and stable labour participation also enhances our competitiveness in the region. We intend to gain momentum in this aspect to ensure sustainable performance in the future.

  • Investing in new capacity and capabilities
    The Malaysia plant and the Myanmar plant will be allocating RM10.5 million and USD1.7 million respectively in 2018 to acquire new machinery. The new machinery will increase our capacity, allowing us to fulfill larger anticipated orders at both plants.
  • Enhancing Efficiency
    The wastage control programme implemented at our Malaysia operations, which focuses on workforce education and engagement, has demonstrated significant progress in reducing production wastage. We would continuously engage with our workforce to identify opportunities to strengthen their skills towards achieving greater efficiency.

    Additionally, the planned purchase of new machinery will result in better efficiency of our manufacturing operations. We also constantly review our manufacturing processes and are committed to the implementation of best practices.

The Group is cognisant of market challenges such as higher raw material prices, currency exchange rate volatility, and regulatory changes in the markets in which we operate.

Nevertheless, we are optimistic of delivering stronger performance as we carry out these measures to strengthen our position as one of the leading consumer flexible packaging player in SEA and the ANZ region.

Lim Soo Koon
Managing Director

April 4, 2018



Registered Office
(formerly known as Daibochi Plastic And Packaging Industry Bhd)
No. 9, Persiaran Selangor,
Seksyen 15, 40200
Shah Alam, Selangor,

Tel No. : 03-55191325
Fax No. : 03-55191884

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Management Discussion & Analysis