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[The Sun Daily] Daibochi in maiden foray into Myanmar

15 November 2016

Wan Ilaika Mohd Zakaria

KUALA LUMPUR: Flexible packaging manufacturer Daibochi Plastic and Packaging Industry Bhd plans to invest up to RM52.6 million for its maiden foray into Myanmar via a joint venture (JV) company, namely Daibochi Packaging (Myanmar) Co Ltd (DPM).

Its investment will be in the form of RM29 million for a 60% stake in the joint venture company and about RM23.6 million for capital expenditure over a three year period.

Daibochi yesterday signed a memorandum of agreement (MoA) with Myanmar Smart Pack Industrial Company Ltd (MSP) to establish a production facility in Yangon, Myanmar to manufacture, market, sell and distribute flexible packaging within the country, as well as to export the product.

Daibochi will fund its equity investment through a combination of internally generated funds and bank borrowings. MSP in turn will inject its entire assets of plant and production equipment into DPM for the balance 40% stake.

The remaining capital expenditure will be invested via Daibochi’s internally generated funds over a three-year period to enhance the facility’s production capacity, quality and efficiency.

Speaking to reporters at the signing ceremony yesterday, its managing director Thomas Lim (pix) said the JV would allow the group to expand its packaging business into Myanmar’s emerging market and benefiting from the lower manufacturing and labour costs.

“DPM’s low manufacturing cost would grant us a competitive advantage in expanding our exports across the Asean region,” he said, noting that group’s export sales is expected to contribute 65% to its revenue within a three-year period, from 55% currently, driven by the new facility.

“As with most of the Malaysian manufacturing sector, Daibochi Malaysia currently faces an acute shortage of manpower, hence access to Myanmar’s large pool of labour would help to alleviate the issue,” Lim added.

Commenting on the JV company’s strategy, Lim said the company will develop new product lines for its existing customer base, in addition to securing supply contracts with more growth-oriented domestic brands.

“The next leap is to transform DPM into an internationally-regarded supplier to leading multinational brands,” he noted.

Currently, 80% of the group’s sales is derived from multinational corporations including Nestle, PepsiCo and Mondelez International.

The JV company is expected to post more than US$8 million (RM35.2 million) in revenue in its first full year operation, based on MSP’s annualised 2016 financials. However, the MoA is still awaiting for authority approvals, which is expected to be secured within the next three to six months, Lim added.

At present, Daibochi has two manufacturing facilities in Malacca, where it exports its products to Australia, New Zealand and Southeast Asian countries.

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News Room [The Sun Daily] Daibochi in maiden foray into Myanmar