This article first appeared in The Edge Financial Daily on February 22, 2018
KUALA LUMPUR: D&O Green Technologies Bhd, whose net profit doubled in financial year 2017 (FY17), is confident of being appointed by Proton Holdings Bhd by year end to supply its automotive light-emitting diode (LED).
Its group managing director Tay Kheng Chiong said the confidence is based on D&O being the LED supplier to AB Volvo, in which China’s Geely Holding Group Co Ltd has an 8.2% stake and 15.6% voting rights. Geely last year acquired a 49.9% stake in Proton.
“Today, 100% of our customers are overseas, but eventually our products will be in Proton since Geely has invested in it,” Tay told a press conference after D&O’s extraordinary general meeting (EGM) yesterday.
He said while D&O is not the LED supplier for Proton’s rebadged Geely Boyue sport utility vehicle, set to be launched later this year, the group is hoping to get the job for future Proton models. “[It] depends on how fast they (Proton) can come out with new car model designs.”
Proton sold 70,991 vehicles in 2017, and newly appointed chief executive officer Dr Li Chunrong has said the group is hoping to boost sales to 200,000 units annually by 2020.
D&O yesterday also said its net profit for the fourth quarter ended Dec 31, 2017 (4QFY17) rose 82.68% to RM6.94 million, from RM3.8 million a year ago, on an improved profit margin arising from a favourable change in sales mix, and increased production efficiencies. Revenue grew 3% to RM132.53 million from RM128.64 million, mainly driven by the automotive segment.
For the full year, net profit almost doubled to RM22.37 million, from RM11.27 million in FY16. Revenue grew 7.7% to RM463.34 million from RM430.1 million.
At the press conference, Tay said the group expects an increasing trend in adopting LED for vehicles’ exterior lighting and interior display application, which bodes well for the group’s sales revenue.
“Our customers forecast that globally, the adoption of LED car headlights is about 3% of the total market, and they foresee this could go up to the 15% level by 2021. A big part of the growth will be from China.
“At the moment, the market for LED adoption for cars is very big. There are not many players in this industry. I think, worldwide, there are only five to eight companies doing this. In Southeast Asia, it is only us, and we are among the top five globally.”
Tay said D&O will continue investing in expanding the group’s production, with an annual capital expenditure of up to 12% of sales revenue.
“Last year, we bought new land and factories for expansion. We will begin renovation in two to three quarters. This plant can cater our capacity expansion needs over five to 10 years.”
In January 2017, D&O bought a 5.95-acre (2.41ha) leasehold land, together with industrial premises, in Melaka for RM11 million, with an estimated renovation cost of RM34 million, carried out in three phases over five years.
At the EGM, D&O shareholders approved the group’s plan to increase its shareholding in Dominant Opto Technologies Sdn Bhd to 89.8%, from 61.84% currently, at RM275.21 million or RM8.95 per share, to be settled via issuance of new irredeemable convertible preference shares.
Dominant is a unit of D&O that manufactures LED. It is the group’s sole operating subsidiary as the other wholly-owned unit, Omega Semiconductor Sdn Bhd, discontinued operations in contract manufacturing in 2014.
Following the acquisition, the remaining 10.2% shareholding in Dominant will be held by Taiwan LED manufacturer Epistar Corp (10%), Tay (0.14%) and Low Tek Beng (0.06%). Tay said for now, D&O has no plans to acquire the remaining shares in Dominant. D&O’s share price closed 0.5 sen or 0.76% lower at 65 sen yesterday, with a market capitalisation of RM664.95 million.