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EG Industries poised to tap into Thailand’s auto industry
Translated by Google Translator:
This article first appeared in The Edge Financial Daily, on May 30, 2016.
KUALA LUMPUR: EG Industries Bhd, which is in the midst of
preparing the listing application for its wholly-owned Thai unit SMT
Industries Co Ltd (SMTI), sees opportunities in the Thai automotive
industry to further expand its presence there.
The electronic manufacturing services (EMS) provider in March
announced that it is planning to undertake the listing of SMTI on the
Stock Exchange of Thailand’s Market for Alternative Investment, which is
expected to happen by 2018.
EG Industries
group chief executive officer cum executive director Alex Kang said the
company hopes to raise 300 million baht (RM34.34 million) from the
listing, mainly to expand the capacity of its manufacturing plant in
Thailand, which has seven production lines for printed circuit board
assembly (PCBA), to 15 lines.
“We think it’s time for our Thai subsidiary to be
independent. Most of the funds we are raising from the listing will be
to expand the plant there,” Kang told The Edge Financial Daily in a
recent interview.
SMTI’s production facility is located in Pranchiburi,
Thailand. With a land area of 171,716 sq ft and a built-up area of
65,560 sq ft, there is ample room for expansion.
Incorporated in 2006 in Thailand, SMTI has been principally
involved in the provision of EMS for computer peripherals, consumer
electronics and electrical products, and automotive industrial products.
SMTI contributes 15% to 20% of the group’s overall revenue.
For the financial year ended June 30, 2015 (FY15), EG Industries’
revenue stood at RM636.1 million.
“We plan to further expand our business in Thailand as we see
a lot of business opportunities there, especially in the automotive
industry,” said Kang.
“As there are more digital components used in our cars,
demand for printed circuit board will grow. [For] anything digital, you
would need PCBA,” he said, adding that there will be more cars installed
with cameras and GPS systems moving forward.
In 2015, Thailand produced 1.9 million cars and 1.8 million
motorcycles. Domestic car sales stood at 800,000 that year, while
domestic motorcycle sales were at 1.6 million, statistics from the Thai
Automotive Industry Association show.
According to Kang, SMTI is only seeing a less than 5% revenue
contribution from the automotive industry presently, and that mainly
comes from the sale of vehicle sensors.
He said SMTI had the technology and operational efficiency to
expand further in the automotive industry, which would also mean a
better margin for its PCBA business there.
“We are in the midst of preparing the [IPO] (initial public
offering) application. I think we will be able to convene an
extraordinary general meeting by end-2017 or early-2018. The listing is
expected in 2018,” EG Industries group financial controller Cheryl Ng
shared.
She said SMTI had appointed AIRA Securities Public Co Ltd as
its principal adviser in Thailand for the proposed listing. While
details of the listing are still being worked out, it is understood that
some 30% of SMTI’s stake will be offered for sale, with EG Industries
keeping the remainder.
As for how its current shareholders will benefit from the
listing, Ng said: “They will be able to enjoy the potential profit
growth of SMTI without forking out more money.”
EG Industries, which also has manufacturing plants in Sungai
Petani, Kedah, has seen its margins and earnings improve after expanding
its customer base and started to turn its attention to box-build from a
predominantly sub-assembly-centric business model that focused on PCBA.
Its overall net margin improved to 4.16% in FY15, from 0.29%.
For FY15, its net profit jumped to RM26.5 million, compared with RM2
million a year ago, despite a lower revenue of RM636.1 million, compared
with RM700.5 million in FY14. Netting off a RM15.4 million gain on
disposal from other investments, its net profit grew about 5.5 times to
RM11.1 million — a record-high for the company.
The share of box-build revenue stood at 10% in FY15, and is expected to grow to 20% in FY16, said Kang.
“The strategy [of adding more box-build businesses] works
well for our business in Malaysia, so we are replicating this in
Thailand,” he shared.
The news of its upcoming Thai unit’s IPO seems to have had
little impact on EG Industries’ share price, which has been trading
between 95 sen and 83 sen since March.
However, its recent win of a two-year contract worth US$36
million (RM147.24 million) from Sweden-based Shortcut Labs AB to be the
sole manufacturer of smart wireless button Flic that creates a shortcut
to favourite actions on mobile devices, which it will also be
distributing in Asia, may put the counter on investors’ radar again.
Its shares closed at 90 sen last Friday, with a market capitalisation of RM189.09 million.
Quarterly results
(Icon) EG Industries (2) - Good Results, Beats Expectation
Author: Icon8888 | Publish date: Fri, 26 Feb 2016, 09:29 PM
Today, EG announced December 2015 quarterly results. For me, the result is satisfactory and above expectation.
Based on annualised EPS of 10 sen and latest closing price of RM0.89, PER is about 9 times.
This
level of PER is not exactly very exciting. However, investors are
buying the stock for its future. EG is at early stage of a beautiful
growth story. With targeted completion of new plastic injection factory
by second half of 2016, group performance is expected to further
improve.
Exciting times ahead.
_______________________________________________________________________________________________________________________________
EG
Industries group chief executive officer cum executive director Alex
Kang said the company hopes to raise 300 million baht (RM34.34 million)
from the listing, mainly to expand the capacity of its manufacturing
plant in Thailand, which has seven production lines for printed circuit
board assembly (PCBA), to 15 lines.
While
details of the listing are still being worked out, it is understood
that some 30% of SMTI’s stake will be offered for sale, with EG
Industries keeping the remainder.
SMTI
contributes 15% to 20% of the group’s overall revenue. For the financial
year ended June 30, 2015 (FY15), EG Industries’ revenue stood at
RM636.1 million.
Concluding remarks
EG owns 100% of SMTI which is worth RM 115 mil by early 2018.
SMTI contributes 15% to 20% of the group’s overall revenue.
Say maximum 20%, EG is worth RM 572 mil! What is EG current market capitalisation ? RM 186 mil.
This is triple EG current market capitalisation of RM 186 mil!
Not to be too bullish, I think EG can easily double its market capitalisation by 2018!Invest at your own risk. Please consult your investment adviser before making any decision.
EG (8907) - Icon, EG Industries is worth triple its current share price!
http://klse.i3investor.com/blogs/philipong/97525.jsp
