Extracted from Annual Report 2017
LY Corporation Limited's ("LY Corporation" or the "Company") vision of internationalisation took flight in 2017 when we were gearing for the listing on the Catalist board of Singapore Exchange ("SGX"). The moment of glory climaxed at our official listing on SGX as we were the first initial public offering on the Catalist board in 2018 on 31 January 2018.
The Company and its subsidiaries (collectively the "Group") is one of Malaysia's leading manufacturers and exporters of wooden bedroom furniture. With an established track record of approximately 40 years in the furniture industry, the Group is an original design manufacturer ("ODM") principally engaged in the design and manufacturing of custom wooden bedroom furniture, and the manufacturing of custom wooden bedroom furniture which may be tailored to customers' specifications and requirements on an original equipment manufacturer ("OEM") basis.
From a small carpentry workshop in Batu Pahat, Johor, the Group grew and now operates from 15 factories and warehouses, occupying a combined built-up area of approximately 1.4 million sq ft. Our products are sold mainly to overseas dealers such as furniture wholesalers and retailers who generally resell the products to end-users through their respective retail networks and domestic customers who are primarily third party agents who typically export and resell its products outside Malaysia, such as to the United States of America.
Our classy and durable products are designed to tailor to the export market, with the United States of America as our largest export market. We are proud to be a supplier to major retailers and reputable wholesalers.
Year In Review
We have chose to list on SGX because of Singapore's excellent reputation as an international finance centre with attractive infrastructure for financial services. Through the listing, we hope to reach out to international business partners as well as investors to power our next phase of growth.
We are confident that we will leapfrog into the next stage of expansion swiftly and grow in tandem with Singapore's growth as a competitive and vibrant financial hub in Asia.
For the financial year ended 31 December 2017 ("FY2017"), the Group's revenue increased by 22.0% to RM350.6 million in FY2017 compared to RM287.3 million in the financial year ended 31 December 2016 ("FY2016"). This can be attributed largely to two main factors:
- an increase in the number of containers loaded with products ("40-ft containers") sold from 5,637 40-ft containers in FY2016 to 6,620 40-ft containers in FY2017 due to the increase in the demand from its customers mainly from the United States of America; and
- an increase in average selling price per 40-ft container from RM51,000 in FY2016 to RM53,000 in FY2017 due to the increase in the selling prices of certain furniture models.
As a result of the increase in the revenue, the gross profit increased by approximately RM12.8 million, or 17.1%. The overall gross profit margin decreased from 26.1% in FY2016 to 25.0% in FY2017 mainly due the increase in the purchase price of most of the raw materials as well as the strengthening of Malaysian Ringgit against the U.S. dollar.
Net profit attributable to the owners of the Company rose by 17.2% from RM43.4 million in FY2016 to RM50.9 million in FY2017.
We are fired with passion to take LY Corporation to the next phase of growth. We aim to expand our sales network in the People's Republic of China ("PRC") to meet the high demand for quality furniture in a burgeoning market. Belt and Road Initiative presents dynamic opportunity for expansion in PRC for wooden furniture players like LY Corporation because of the direct access to over 1 billion consumers based in China. Potential demand growth from PRC augurs strong as PRC's import of wooden furniture increased by 79.8% from 2011 to US$563.6 million in 2016. In 2016, export value from Malaysia to China was only RM116.2 million, which was 1.55% of the world's export value of RM7,474.3 million with plenty of room for Malaysia's wooden furniture players to grow our exports.
We are excited at the prospects of introducing advanced and automated woodworking machinery in our factories and therefore we plan to upgrade machinery and equipment and acquire new technology to increase productivity and cost efficiency.
As at to-date, we have completed the construction of an additional manufacturing facility which is currently awaiting for the approval from relevant authorities before we can commence production which will contribute towards the increase of our production capacity. A new hostel to house all our foreign workers is under construction on an approximately 1.9 acres of land (within walking distance from our factories). Last but not least, we are open to explore investments, mergers and acquisitions, joint ventures and strategic collaborations to strengthen our competitive advantage through enhancing our core competencies and giving us access to new markets, customers and businesses.
Innovate for Competitive Advantage
Our competitive strengths have placed us in a market leadership position over the past 40 years. Not only do we have established track record in the furniture industry, we are well recognised for the quality of our furniture products. Strong in-house design and development capabilities have enabled our Group to cater effectively to the customised requirements of our customers. Furthermore, our established subcontractor network of subcontractors, some of which have worked with us for more than 10 years, has given us an unsurmountable competitive edge over our competitors.
We strive to innovate constantly to sustain our competitive advantage in a fast-moving business environment and fast-changing consumer purchasing behaviour. Since 2014, we have been collaborating with a software company to develop and implement an integrated real-time monitoring and management system ("LY-6M system") which monitors the entire production process. We believe that our implementation of the LY-6M system, an integrated process management system which monitors our entire production process, is expected to significantly enhance our productivity and efficiency through improvements in raw material optimisation, inventory optimisation; monitoring and tracking, data collection and analysis, and performance measurement and appraisal.
We have proposed to distribute a special dividend for FY2017, representing a payout per share equivalent to 3.0% of the placement price per share pursuant to the share placement carried out for the initial public listing of LY Corporation, to be approved at our upcoming annual general meeting. This represents a special dividend of S$0.0078 per share.
In addition, our Directors intend to recommend and distribute dividends of not less than 40.0% of our net profits after tax attributable to our shareholders in respect of each of FY2018, FY2019 and FY20201.
Note of Appreciation
On behalf of LY Corporation, I wish to thank SGX and all professional firms for their invaluable support in making the public listing on the Catalist board a success.
I would also like to thank my business partners for their partnership over the past 40 years because their faith in my vision has enabled me to lead LY Furniture Sdn. Bhd. from a cottage workshop to a public-listed company in Singapore today. I am also grateful to our customers who have placed their trust in us and grew with us all these years. My deepest appreciation goes to my management team and staff for working hand in hand to realise the dream of taking LY Corporation beyond the shores of Malaysia and blossom into an international company.
We look forward to your continued support for the new company as we expand beyond United States of America.
Tan Kwee Chai
- Please note that these statements are merely statements of our present intention and shall not constitute legally binding statements in respect of our future dividends which may be subject to modification (including reduction or non-declaration thereof) at our Directors' sole and absolute discretion.