Introduction: 

From the start, Koda shows their touch-of-class with a nicely organized prospectus done with a small color chair in the top corner of every page and a dining room set watermark on every page. Koda, makes wood furniture, something like the popular ready-to-assemble tables and chairs you buy at IKEA (who accounted for over 12% of FY2001 sales). The main types of wood used by Koda are rebberwood and pine, which are reforested and therefore do not face risk of extinction. The company was incorporated in 1980 and today has manufacturing operations in Malaysia and Vietnam. Key markets for Koda are exports to Europe, North America and other Asia-Pacific countries, with key customers including wholesalers, distributors and major retailers. In 1995, Koda initiated a production-direct-to-retail marketing effort in the UK and Ireland to expand their client base to include small & specialty retailers. Due to the initial success of this "factory-direct" marketing strategy (growth from 1% of FY1996 sales to 17.4% of FY2001 sales) through Zenith Asia in UK & Ireland, Koda intends to further develop this marketing strategy, and has signed two MOUs in France/Belgium and Germany to establish business partnerships, as well as acquiring a 19.9% stake in Australia/New Zealand-based Devon.

Koda's furniture products are priced affordably. Retail prices typically range from $400 to $1,500 for a dining room furniture set that typically includes a table and four chairs. The target end customers are middle-to-upper-middle-class households. Therefore, while price is an important consideration, this target customer also tends to be more design sensitive and willing to pay a premium for more interesting and stylish products. Such discerning buyers account for the success of Koda's premium-priced Madrid collection (rustic pine furniture). This rustic collection uses recycled pallets instead of harvested pine wood to be more environmentally friendly and cost competitive. Other premium-priced collections include Indochine (French-Oriental influenced furniture) and Marache (French oak furniture).

Koda's premium-priced collections are targeted to wealthy countries like Japan and Korea. All products are usually delivered to customers in ready-to-assemble form, which allows packing in flat boxes to reduce transportation & warehousing costs. The Directors believe that Koda's major competitors are likely to come from Italy and cheaper production centers such as Mexico, China, Malaysia, Poland and Indonesia.

Koda's Sales Growth Strategies include:

• Expansion of suites and collections using design innovation on themes;
• Geographic expansion into India, Hungary, Russia, Poland and the USA;
• Ride the trend towards greater acceptance of ready-to-assemble furniture;
• Reach out to small & specialty retailers efficiently with factory direct marketing; and
• Expand non-dining room furniture, such as outdoor/garden furniture.

Koda's Margin Improvement Strategies include:

• Increase the proportion of premium-priced design-intensive products;
• Lower production costs by moving production to Vietnam and using high-speed mass production;
• Capture wholesale and distribution margins by expanding factory-direct marketing efforts; and
• Increase business efficiency through with an online (B2B) catalogue and CRM software.

IPO Details: 

Issue Size: 15 million new shares

• 13.5 million by placement
• 1.5 million by public offer
  

Offer Price: S$0.26
Underwriter: UOB Asia Limited
Offer Closes: Noon 16 January 2002
First Trading Day: 18 January 2002

Estimated IPO Net Proceeds: S$2.9 million, to be used as follows:

• $1.2 million to invest in factory-direct marketing strategy
• $1.1 million to increase production capacity by acquiring plant and equipment in Malaysia & Vietnam
• $0.1 million to improve IT and back office
• $0.5 million for working capital

BUSINESS OVERVIEW

Koda is an original design manufacturer of dining room furniture specializing in affordable ready-to-assemble dining room furniture for middle-to-upper-middle class households. The bulk of the chairs and tables produced by Koda, and much of the rattan and occasional pieces (e.g., cabinets or drink trolly), are for use in the dining area. Dining room furniture accounted for over 75% of total unit production and more than 65% of revenue for FY2001. Outdoor/garden furniture, which accounted for 15.2% of FY2001 revenue, is the second largest product range. Koda produces mainly wood-based furniture and some rattan furniture. They use various types of wood in the products including rubberwood, merbau, membatu and plantation timber from Malaysia, pine and birch from Scandinavia, jackfruit tree, cashew and acacia from Vietnam, oak from China and recycled wooden pine pallets. The main types of wood used by Koda are rebberwood and pine, which are reforested and therefore do not face risk of extinction.

Most of Koda's products are exported. In FY2001, 99.5% of their revenue was from exports. Export markets include Europe, North America and Asia-Pacific. They sell primarily to wholesalers, distributors and major retailers. Since 1995, they have also marketed directly to Small and Specialty Retailers in the UK and Ireland through their 70%-owned UK-incorporated joint venture, Zenith Asia. The remaining 30% equity in Zenith Asia is owned by Graham Everard Butcher. Zenith Asia's contribution to total revenue increased from less than 1% in FY1996 to 17.4% in FY2001. Due to the success of this production-direct-to-retail marketing strategy through Zenith Asia, Koda intends to further develop this marketing strategy, and has signed two MOUs in France/Belgium and Germany to establish business partnerships. In addition, Koda has acquired 19.9% of the share capital of Australia/New Zealand-based Devon.

Koda's products are priced affordably. Retail prices typically range from $400 to $1,500 for a dining room furniture set including a table and four chairs. The target end customers are middle-to-upper-middle-class households. Therefore, while price is an important consideration, this target customer also tends to be more design sensitive and willing to pay a premium for more interesting designs. This is evidenced by the success of Koda's premium-priced Madrid collection (rustic pine furniture). Koda also uses recycled wooden pine pallets instead of harvested pine wood to be more environmentally friendly. Other premium-priced collections include Indochine (French-Oriental influenced furniture) and Marache (French oak furniture).

COMPANY HISTORY

1972: Koda Woodcraft was founded by Mr. TK Koh to produce wooden TV and speaker cabinets.
1975: Commenced production of design-intensive wooden jewelry boxes for export to US.
1977: Started manufacturing wood-based dining room furniture.
1980: Incorporated Koda Woodcraft Pte Ltd, moved into current HQ in Defu Lane, dominant product line became dining room furniture, started exporting dining room furniture to Australia.
1983: Koda Malaysia was incorporated.
1985: Factory at Senai was completed and Koda Malaysia started manufacturing there.
1989: Jatat was incorporated to manufacture rattan furniture in Malaysia.
1993: Jatat moved into 2 new factory buildings on the new Mukim Senai-Kalai site.
1995: Started sourcing wooden chair components from Vietnam, incorporated Zenith Asia in UK, a 70%-owned joint venture, to market to specialty retailers in UK and Ireland.
1996: Shifted all manufacturing operations in Singapore to Malaysia.
1997: Moved Koda Malaysia to 3 additional factory buildings at Mukim Senai-Kulai to consolidate Jatat and Koda Malaysia operations.
1999: Koda received approval from Ho Chi Minh City Export Processing & Industrial Zone Authority to operate a furniture manufacturing factory in Vietnam, Koda Vietnam was incorporated.
2000: New factory in Vietman began production.
2001: Sixth factory building in Mukim Senai-Kulai was completed.