This article first appeared in The Edge Financial Daily on July 31, 2017

SHAH ALAM: Steel product manufacturer AYS Ventures Bhd has earmarked about RM35 million for capital expenditure (capex) in the current financial year ending March 31, 2018 (FY18) to install a fully automatic computer numerical control (CNC) facility, coupled with a warehouse complex building, within the Port Klang Free Zone (PKFZ).

Its executive director, Oh Yung Sim said the capex spent was expected to improve the group’s performance in terms of achieving greater cost efficiency as well as cultivating better earnings growth.

This would also enable AYS to venture into the industrialised building system (IBS) — a construction technique that the government is urging construction firms to adopt.

“The focus is on how to keep improving the group. With the new expenditure, it should improve the company’s performance.

“Our hope is always positive, although uncertainties happen every day. As long as our government infrastructure projects [are] still there, we think it should be positive unless our country stops the [infrastructure] developments — then our business will be affected,” he said.

“There is a capex commitment; the entire capex is about RM35 million. However, some [RM7 million] has been incurred,” Yung Sim told The Edge Financial Daily recently.

Yung Sim believes that demand for steel products is still on the growth path, and AYS is expecting healthy earnings growth in FY18 and beyond.

For the full financial year ended March 31, 2017 (FY17), AYS’ net profit grew by 236% to RM27.8 million from RM8.3 million earlier. Revenue, however, dropped 10.4% to RM530.1 million against RM591.4 million in FY16.

AYS’ share price has gained about 83% since the start of the year, thanks to renewed interest in steel-related companies amid a recovery in steel prices and expectations of higher demand as a result of the ongoing mega infrastructure projects in Malaysia. Its share price closed at 60 sen last Friday, compared with the recent peak at 66 sen on June 13.

Previously, AYS was only involved in the trading of steel products. Over the years, the group has broadened its product range to provide value-added services as well.

The CNC structural steel facility, known as a service centre, will produce steel structural components in accordance with customers’ designs and requirements.

“It is a value-added service complementing our trading whereby the machine is used for [the] cutting and drilling of the material (steel).

“It can be called the beam service centre (long product service centre). Basically, it is a service centre to cater to our existing range of products — then we have value-added services,” Yung Sim said.

Meanwhile, Jess Oh Pooi Foon, who is also the company’s executive director, said the group’s ability to produce custom-made products will allow it to have a stronger collaboration with customers.

“We actually take up part of their (customers’) work, and help them in terms of cost-saving and time-saving,” said Pooi Foon, adding that the group’s customers would then be able to reduce their manpower and transport resources and speed up the workflow.

Yung Sim said the CNC facility was expected to be commissioned by the third financial quarter ending Dec 31, 2017.

“The machine is still in the process to come into our premises. The actual operation commencement would probably be [in] early next year,” he said.

In addition, Pooi Foon said the new processing facility would also enable the group to develop IBS, which was in line with the Malaysian government’s objective of promoting IBS.

“IBS is actually known as a finalised system; it is like Lego which is ready to [be] assembled.

“Through this concept, the materials that are used for construction will be ready to [be] assembled at the site. They don’t need to rely so much on labour and it reduces environmental issues as well,” she added.

On the warehouse complex, Yung Sim noted that the group has leased a plot of land measuring 10 acres (4.05ha) within PKFZ to build a covered warehouse of about 150,000 sq ft, which will operate as a warehousing service.

“It is actually a warehousing service for us to keep steel products. We will be the anchor customer of this warehouse, and, of course, we will also offer to sell it to other customers,” he said.

The group exports its products to China, Laos, the Middle East, Singapore, South Africa, Vietnam and other Asean countries.

“In fact, we already have exports; only the quantum is not that much. But we think as we have invested in a warehouse within PKFZ, this would help us to expand to more areas,” Yung Sim said.

Currently, AYS operates three factories and three warehouses in Klang, Selangor, covering a combined factory and warehousing area of about 425,000 sq ft.

Upon completion, the combined factory and warehousing area of the group will increase to about 578,000 sq ft.

Yung Sim said the warehousing operation is targeted to commence by the first quarter of next year.

“The warehouse is an ongoing project; it is still in progress and expected to be ready by FY18.

“Physical completion will probably be in the third quarter, but we will be able to start operation during [the] last quarter of FY18,” he explained.