Monday, October 29, 2012
Samko: 20 Oct investor meeting takeaways by NextInsight. Samko is one of the largest plywood manufacturers in Indonesia. Commands ~40% of the market, and has its own "Palem" brand of plywood. While it has never directly owned a forest concession, it buys logs from the open market. ~85% of its logs are from plantations of farmers in Java, rather than from the primary forests of Kalimantan and Sumatra. The remaining 15% of supply comes from state companies in Java. Samko processes 1.5m cubic m of plantation wood/yr, equivalent to 10k ha of plantation forest. ~75% of sales are domestic, with 20% flowing through to its retail stores. Samko has majority mkt share in Japan, and also supplies to Korea, Msia, Spore, US, Europe (Sweden, Netherlands) and the Middle East. Mgt notes its cost leadership, says it is profitable unlike many peers, which need to be supported financially by their logging business, bcs of its energy efficient pdtn process, and strategic location of its processing plants and satellite plants, thereby saving on transport costs. Mgt growth strategy spans these 4 areas: i) Moving upstream -- in Jun '12, Samko acquired 100% of Bioforest for $7.4m via a sh issue to Temasek Life Science Ventures at 13.62 cts/sh. Samko has started planting a few thousand hectares with Bioforest's sampling technology. It takes 5-7yrs for the samplings to be logged. ii) Moving downstream -- Samko has started its own chain of retail stores (32 now and growing) to sell plywood, in addition to its traditional reliance on distributors. Expects profit margins per store to be boosted when the stores expand the pdt range to include finished pdts such as doors, and buildings mat's. iii) Proprietary wood decking -- sales of the branded "Heveatech" wood, warrantied to be free from termites for a lifetime. iv) Pre-fab housing -- Samko's 500 sf pre-fab house (targeted to be used by mining, plan oil companies) sells for the equivalent of $10,000 (ie. just $20 pst, excl land, civil and M&E works). The counter remains thinly traded. At $0.135 last close, the co trades at 28x P/E, 2.8x P/B.