Published October 13, 2009

Shares of Three-A gain on Wilmar placement

Kuok-controlled Wilmar to own nearly 17% of M'sia food supplies maker

By PAULINE NG
IN KUALA LUMPUR

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SHARES of raw food materials maker Three-A Resources rose 12 sen or 13 per cent to RM1.06 yesterday as investors continued to bet the company's fortunes would rise significantly with Wilmar International as a partner opening doors in China.

The increasingly well-known Malaysian company has become the envy of firms small and big following its announcement last week that Singapore's Kuok-controlled Wilmar plans to subscribe to its private placement of some 62 million shares for 75 sen a share or some RM42 million cash (S$17.2 million). Post placement, Wilmar would own nearly 17 per cent of the company which was listed in 2002 on the Mesdaq market and only promoted to the main board last year.

Its fortunes appear to have brightened with China looming big in the equation. Who better to ride on than Wilmar - a major distributor of rice, sugar and cooking oil in China - and its extensive network in China?

Although Three-A already has customers in China which are supplied from its factory in the Klang Valley where it makes liquid and powder caramel, glucose, vinegar, soya protein and maltodextrine - a gluten-free starch sweetener - for sauces and mixes, analysts expect Wilmar to also help with the establishment of new plants in China to expedite deliveries and enhance customer relations.

Three-A had said the proposed private placement and funds raised would enable both companies to 'collectively venture into any future overseas investments'.

Still in a bit of a shock, Three-A's deputy executive chairman and managing director Fang Chew Hann conceded in an interview with The Edge that even in his wildest dream he would not have imagined Wilmar, which raked in profits of S$1.5 billion in 2008, knocking on its doors. 'We've a chance to sail on this big ship ... But we're small, we'll sit in one corner,' its executive director Fong Chu King added.

The Fang (Fong) family currently controls some 44 per cent of the company but would end up with nearly 37 per cent after the share placement. Another big shareholder, Malaysia's Pilgrim Fund, would own 4.6 per cent post-placement.

Since its listing, Three-A's profits has about tripled from RM4.4 million in 2002 to RM12 million last year. The new shares are expected to result in a dilution of earnings, but the company anticipates the planned investment overseas would contribute positively to future earnings.

Given its issued share capital of 369.6 million shares post-placement, its market cap is less than RM400 million - still too small for analysts to track the company although that could change in the near future.