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SCMP Reporter

AT the end of last week, timber company Aokam Perdana joined a long list of Malaysian firms that have more than fallen from their late 1993 peaks.

  The share price of Aokam nose dived 30 per cent late last week amid rumours that the company would report profits more than 60 per cent below market expectations.

  On Friday afternoon, Aokam reported a 14 per cent drop in pre-tax profits for the six months ended December 31, 1994.

  The M$39.1 million (about HK$122.6 million) of pre-tax profits for the first half of Aokam's fiscal year make consensus forecasts for the year of M$210 million look wildly overblown.

  Analysts blamed the fall in profits on narrowing margins. Sales climbed 24 per cent to M$123.6 million for the reporting period.

  Shares in Aokam fell M$1 to close at $10 on Thursday.

  By midday on Friday, when the company's shares were suspended pending a results announcement, the price had plummeted to M$7.70, a 71 per cent drop from its one-time high of M$27.

  The company has asked the stock exchange to resume trading in the shares on Monday.

  In a statement to the Kuala Lumpur Stock Exchange, Aokam blamed the poor results on heavy rainfalls that made log harvesting difficult and on the collapse of the Chinese plywood market. The company expected its performance to pick up in the second half, in part due to increased demand for wood following the Kobe earthquake in Japan.

  Since late 1992, Aokam has been the darling of foreign institutional investors, because of its guaranteed supply of low-priced logs and its advanced manufacturing techniques.

  Aokam has argued that by building a flexible factory that allows the company to switch between plywood manufacture and moulding manufacture, the company has reduced dependency on either product.

  Plywood prices fell from US$700 per cubic metre in early 1993 to US$400 per cubic metre at the beginning of last year.

  But Aokam said in its statement that prices for moulding products are also off, in effect leaving the company little room for manoeuvre.

  The fall in Aokam's share price has not come without warning. More than two years ago, Pauline Almeida, then head of research for Phileo Peregrine Securities in Malaysia, said Aokam was worth M$8 per share at best, based on discounted cash flow analysis.

  In June 1994, Aokam issued a US$135 million 3.5 per cent convertible Eurobond. The bond is convertible at M$19.11, which at the time of issue was just three per cent above the five-day average closing stock price for Aokam.



Timber firm Aokam slides on profit fall