KMC to Build Motorbike Chains Factory in Vietnam for US$5 M.

Taiwan-based KMC Chain Industrial Co., Ltd., world's largest bicycle chain supplier by shipment, plans to invest US$5 million in the coming three years to build a factory in Vietnam to further expand sales in Southeast Asia.

KMC has two factories in Taiwan and Vietnam, with the former dedicated to making chains for brands of high-end bicycles and the latter, expanded in 2011, mainly supplying motorcycle chains for Honda, Yamaha and so forth with annual output of about 10 million units.

KMC will build another plant in Vietnam to tap the huge growth potential of the motorcycle market in the ASEAN (Association of Southeast Asian Nations) bloc, particularly in the country and Indonesia.

KMC pointed out that one of every four residents in Vietnam, where the population exceeds 90 million, has a motorcycle, and domestic demand reaches over 3 million units a year. Meanwhile, the group furthered, Indonesia is now the world's third-largest motorcycle market, trailing China and India, with up to 8 million units needed a year.

KMC commands nearly 90% of Vietnam's market for motorcycle chains, with annual revenue of NT$600-700 million there.

The maker noted that after completion, the factory will channel 60% of its output to the domestic market, and the remainder to Indonesia, Burma, Cambodia, the Philippines and Pakistan. Noteworthy is that the plant's chains exported to Indonesia will be supplied to not just motorcycle manufacturers, but also parts makers and aftermarket retailers.

Additionally, KMC also eyes the vast bicycle chain market in China. Institutional investors reported that the group will merge a factory in China's Tianjin in July, which  supplies chains to local bicycle makers in northern China and is regarded as the group's new growth engine in the country, given that about 40% of China-made bicycles are manufactured in Tianjin every year and the volume has risen steadily 8-10% over the past years. The merged factory will push the group's overall output to 40 million units a year.

After scoring EPS (earnings per share) of NT$1.04 in the first quarter of this year, KMC is expected by institutional investors to finish the whole year with annual revenue of NT$2.7-2.8 billion and EPS of NT$5-6. (SC)