Turnaround projected for TAWIN (7097) TA WIN HOLDINGS BHD
LOSS-MAKING copper wire and rod maker Ta Win Holdings Bhd says it will soon be reporting a profit in the coming fourth quarter (Q4)of its financial year ending June 30, 2021 (FY21) following several corporate moves it had made to diversify its business last year.
The company’s group managing director Datuk Seri Ngu Tieng Ung tells StarBizWeek the anticipated turnaround in Q4 is also due to profit guarantees that it had received for stake acquisitions it had made into two companies last year.
The two companies which it had acquired are associate company Royce Pharma Manufacturing Sdn Bhd (RPM) in which Ta Win has a 32.5% equity stake and subsidiary Sin Line Tek Electronic Co Sdn Bhd (SLT) in which Ta Win has a 51% stake.
“We will be receiving profit guarantees for investments in RPM and SLT. These profit guarantees are expected to support our financial performance in the next two financial years,” Ngu says. “In addition, this will generate additional streams of income for us, while diversifying and cushioning us against potential risks across different industries,” he adds.
He also notes that RPM is expected to deliver improved earnings, with minimal supply disruptions for government and private hospitals despite the lockdown and also notes that Ta Win is already seeing greater synergies with RPM’s existing businesses.
The RPM acquisition was made back in December 2020 for a cash consideration of RM20.85mil and gives a profit guarantee of RM10mil for the first year and RM10mil in the second year.
Ngu says that this profit will soon be recognised based on Ta Win’s proportionate share it owns in RPM. “We expect our investment in RPM to positively impact Ta Win’s financial performance in the future,” he says.
RPM manufactures and supplies pharmaceutical products, namely, drugs and supplements registered under the National Pharmaceutical Regulatory Agency.
It also makes non-pharmaceutical products such as medical disposables, equipment and devices under the government’s Approved Products Purchase List.
The acquisition into RPM also allows Ta Win to explore the downstream application of the biochemistry and chemistry of copper as well as copper proteins eventually.
Meanwhile, Ta Win’s 51% stake acquisition in SLT allows the company to extend its existing product range into the manufacturing of cable, wire harness and AC & DC power cords for the electrical and electronics (E&E) industry.
The SLT acquisition was done in July 2020 for a purchase consideration of around RM12.2mil through a combination of new Ta Win shares and cash.
This acquisition comes with a profit guarantee of RM2.6mil and RM3mil for this year and the next respectively.
The SLT acquisition also lets Ta Win broadly beef up its core business by selling products that is used in the E&E industry.
Ngu also says that the company expects its financial performance to sustain moving forward after it reported a lower net loss in Q3 of FY21 of RM254,000 from a RM3.44mil net loss in the same quarter a year ago.
“Given our improved financial performance coupled with our strategic plans ahead, we expect to continue the positive momentum moving forward,” Ngu says.
Ngu also did not rule out more acquisitions in the near future, noting that it is adopting a venture capitalist approach to expand its business with both stable organic growth and strategic acquisitions.
“We would like to proactively stay ahead of the curve, while exploring mergers of businesses that are beneficial, complementary and synergistic to our existing core businesses,” he says. Meanwhile, Ngu says its subsidiary Cyprium Wire Technology Sdn Bhd (CWT) will soon complete one unit of an electron beam irradiation plant later this year.
He notes that there is another unit that is targetted for next year and it will be done after it is able to secure more large overseas cable and wire orders.
“Currently, the premium cables and wires are mainly procured from overseas, with a minority from an international producer’s local manufacturing plant,” he explains.
Ngu says that the electron beam technology is the key component that is needed to produce premium-grade copper wires and cable products with a working temperature of 105-150°C and it has a capability to withstand up to 275-350°C at its maximum load.
“Crosslinked wires via electron beams have a longer lifespan of 15-25 years, compared with to non-crosslinked wires which have a lifespan of five to seven years,” Ngu says.
“These premium-grade wires and cables are specifically used for major heavy high technology industries such as automobiles, electric vehicles, aerospace, medical devices, solar power, oil and gas (O&G) and advanced railway and bullet train manufacturing,” he adds.
Ta Win expects this part of the business under CWT to progress well following several big long-term supply contracts that have been secured with both local and global clients in the automobile industry such as through its joint venture with Aptiv Global Operations Ltd and clients in the O&G industry.