Apparel and uniform maker Good Fellow Group has turned to forestry by acquiring Beijing Wan Fu Chun Forest Resources Development Co (Beijing WFC).
The move could prompt mainland textile makers to venture into other businesses too, especially because the returns in the general garments sector is low.
The HK$560-million acquisition was approved at Good Fellows special general meeting yesterday and would allow the company to hold a 70 per cent stake in Beijing WFC.
Good Fellow Chairman Ng Leung Ho was on the upbeat after the acquisition, saying the forest business looked promising and would contribute a great deal to the companys future development.
Beijing WFC could contribute up to 50 per cent of the companys turnover in the long run, Ng said, and its net profit was likely to climb up to 80 per cent or more in the next two years.
"We estimate that Beijing WFC will generate a net profit of not less than HK$200 million in 2006 and 2007," Ng said.
Good Fellow recorded a net profit of HK$2.453 million for the six months ending in December 2005, compared to a loss of HK$23.259 million in 2004.
Beijing WFCs major product is broussonetia papyriferalvent, a moraceae plant with many economic values that can be used to make high-quality paper, improve soil fertility and rid land of salinity to make it cultivable.
Ng told reporters that Beijing WFCs output from its broussonetia papyriferalvent-based products such as timber and barks could reach 300,000 and 30,000 tons in the second half of 2007 and double by the second half of 2008.
"The sales of Beijing WFCs broussonetia papyriferalvent-based products will be sufficient to support its development and expansion," Ng said.
But despite the claim of a rosy future after the acquisition, Good Fellows shares remained unchanged, to close at HK$0.295 yesterday.
