Delloyd ... Aug10

Delloyd Ventures plans to manufacture buses in Malaysia. It is currently in discussions with Syarikat Prasana Nasional Bhd (SPNB) on the possibility of manufacturing a lower decked long bus. While plans for manufacturing buses in Malaysia are not new, the ongoing discussions with SPNB are a positive indication that could provide a catalyst for the stock.

A contract to procure an elongated high-deck bus for the Jakarta administration was valued at about RM1.1 million to RM1.2 million, with a total order of 42 units in 2008-2010. Given Malaysia's smaller population base, the order would be 10 buses at the most.

Although Delloyd has successfully deployed a number of buses for Jakarta's public transport system, industry observers see some stumbling blocks to the deal due to a lack of accommodative traffic infrastructure for a dedicated bus way for low-deck buses, as well as its bus stations/stops. However, the management is confident that it will secure a contract with SPNB given its track record in Indonesia.

The investment to set up a new production line to kick-start the manufacturing of these buses would be rather minimal, and not exceeding RM30 million as most of the parts are outsourced.

Going forward having made inroads into the auto industry in Indonesia with a bus making venture, is planning to replicate that success by bringing its business to Malaysia.

It is looking at introducing its first bus prototype by 2010 for inspection by the relevant authorities.

Dellyod started its bus manufacturing business in March 2009, when it acquired a 51% stake in PT Asian Auto Intl. This marked the latest by the group to enhance its earnings base.

It has been actively diversifying its revenue base. It ventured into the oil palm industry in 2001 through 90% owned subsidiary.

The plantation division contributed 11.4% to Delloyd’s total revenue for 1Q2010 ended March 31, 2010, but the auto division remains Delloyd mainstay for now. It contributed more than 76% to total sales for the quarter.

Some of Delloyd’s biggest domestic OEM clients based in Malaysia are Proton, Perodua, Toyota, Hyundai Sime Darby…

It exports to more than 10 countries.