14 Feb 2024 Glass wool maker PGF plans new production plant
PETALING JAYA: Glass wool maker PGF Capital Bhd, which is also one of the largest landowners in Tanjong Malim, Perak, plans to build its new production plant in either Kulim, Kedah or Banting, Selangor.
TA Research said the PGF management is in negotiation with landowners after shortlisting two parcels of land each in Kulim and Banting.
“Assuming construction works would begin in the second half of 2024 (2H24) and a construction duration of 24 months, the new plant is targeted for completion by 2H26,” it said in a note.
The new facility, to be built at RM170mil, will raise PGF’s annual capacity by an additional 38,000 tonnes to 63,000 tonnes.
It is noteworthy that PGF has sold out its production capacity for 2024 and had resorted to Thai imports to meet the rising demand.
“The shortage of capacity should have made PGF a price-maker now.
“However, management would only raise the selling price of glass wool a tad for 2024 to cover the rise in cost of sea freight.
“It prefers to maintain a favourable relationship with its Australian customers, who are already paying top dollar for PGF’s glass wool,” said TA Research.
PGF is 73.3% controlled by Fong Wah Kai and family.
Apart from PGF, the only other glass wool manufacturer in Malaysia is Knauf Insulation, said TA Research. Notably, PGF stands out as the sole player listed on Bursa Malaysia.
TA Research said PGF is considering both equity and debt financing to fund the RM170mil capital expenditure requirement.
Ideally, the substantial shareholder – the Fong family – could reduce its 73% stake in PGF and sell it to strategic investors or partners.
The proceeds from sales of PFG shares would be ploughed back into the company via conversion of irredeemable convertible preference shares by Fong family.
This would address both the public spread issue and equity fund raising, it said.
Meanwhile, TA Research pointed out that PGF’s planned property development over 403 acres in Tanjong Malim has a potential gross development value of RM3bil.
The development comprised both residential and commercial elements at a ratio of 9:1.
On the residential component, it will consist of 6,000 units, mainly affordable housing, selling at more than RM300,000 per unit.
“According to management, the company would only retain some commercial units for future recurring profit.
“In terms of launch, it is targeted in June after getting the final approval from the state government,” said TA Research.
The land is part of PGF’s leasehold land measuring 1,311 acres, which is a stone-throw away from Proton City.
About 300 acres had been earmarked for plantation and aquaculture as well as 590 acres for agritourism.
Recall that the 1311-acre land was purchased in 1999 via a rescue mission to save an ailing development company.
However, the aftermath of the 1997 Asian Financial Crisis had brought the property development to a halt and resulted in a massive impairment of land value at about RM111mil in 2006.
There is a silver lining for PGF as DRB-Hicom and Zhejiang Geely had signed an agreement for the development of Automotive High-Tech Valley in Tanjong Malim, which is expected to attract some RM32bil investments over the next few years.
