Tong Lung set for market rebirth

After going through a successful restructuring, Tong Lung Metal Industry Co (東隆五金) is ready to make its comeback. In eight years it's gone from being a debt-ridden company to preparing to list its common stock on the local bourse later this month.

"Without a doubt, Tong Lung will be back on the blue-chip list again," said Calvin Chen (陳程坤), an analyst at Yuanta Core Pacific Securities Corp (元大京華證券).

The shares of Tong Lung, a leading door lockset maker, currently require full-payment transaction. The company is set to resume normal transaction of its shares on the over-the-counter GRETAI Securities Market on March 23. The company will hold an investor conference next Wednesday.

Investors have shown their support for the company, with shares of Tong Lung advancing NT$3 to close at NT$46.2 yesterday.

Established in 1977, Tong Lung was once the world's third-largest door lock manufacturer, but incurred a huge debt of NT$6.2 billion (US$190 million) in 1998 after its president Fan Fang-kuei (范芳魁) and his brother Fan Fang-yuan (范芳源) lost NT$8.8 billion speculating on the stock market.

The company then applied to the Chiayi District Court in order to undergo a corporate restructuring plan, and invited Taiwan Securities Co (台証證券) to be its financial consultant for the plan.

Despite the firm's bankruptcy, Tong Lung's superior techniques in the lockset industry helped it secure a lifeline in December 2000 from HSBC Private Equity (Asia), which injected NT$1.8 billion to take a 70 percent stake in the company. The Shin Kong Group (新光集團) and Chailease Finance Co (中租迪和) also put up NT$400 million.

In 2001, Tong Lung completed its transformation, becoming an example of a company that had undergone successful restructuring.

The key figures that steered the rejuvenation, however, are two men who do not have a background in the industry: Vincent Chen (陳伯昌), then board director of HSBC and vice chairman and president of Tong Lung, and Wang Chung-yu (王鍾渝), the former chairman of state-run China Steel Corp (中鋼), who took the company's chairmanship in 2002.

In addition to exercising their expertise in finance and management, the duo are also super salesmen who frequently travel aboard to secure foreign orders.

Their efforts paid off, as Tong Lung wiped away all its red ink in 2004 and started to turn a profit last year. As a result, the company posted a 15 percent year-on-year sales increase to NT$2 billion last year, and issued NT$1 in cash per share and a NT$0.2 dividend per share to its stockholders.

The company's product line extends from basic metal door locks to electronic security systems. Tong Lung has a slew of door lock technology patents and products that have secured its leading position in the industry despite the financial crisis, Yuanta Core Pacific's Chen said. He added that Tong Lung's smaller rival Taiwan Fu Hsing Industry Co (台灣福興工業) still has a hard time trying to catch up to it.

Sales for the first two months of the year were NT$490 million, a 95.26 percent jump from a year ago, the company said. Tong Lung's current capitalization is NT$791 million, including common shares of NT$687 million.