Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily, on November 28, 2016.

 

KUALA LUMPUR: Loss-making semiconductor design company Key Asic Bhd has been trying to turn around in the last three financial years without any success.

The company, which has been in the red since 2010, had especially been hopeful in the financial year ended Dec 31, 2015 (FY15) that its two newly launched products, K-card and K-drive, would propel profitability.

But the turnaround plan failed to bear fruits. It was partly attributed to a delay in the launch of the products, and accounting scandals involving two major customers — Singapore-based Trek 2000 International Ltd and Japan-based Toshiba Corp — which resulted in a plunge in orders over the past year.

“We have not been able to meet our [financial] expectation due to K-card and K-drive not selling in the volume that we had expected,” said Key Asic chairman Eg Kah Yee in an interview with The Edge Financial Daily.

He said the expected sales to Toshiba did not materialise as the electronic products maker had delayed its new product launches due to the scandal.

“We had been instructed by Toshiba to design and double their existing Wi-Fi SD (secure digital) card data transfer rate. We completed the research and development on the product early this year and it was supposed to go into mass production by June this year.

“However, it did not take off as planned. We are still trying to get the Toshiba [product] to be back on the track. Hence, there will be a delay by at least one quarter for the earnings to kick in,” Eg added.

Turning to Trek 2000 scandal, Eg said: “I am not sure what triggered it. Since the scandal broke out, the management of [Trek 2000] came under investigations. Subsequently, its marketing officer and chief technology officer, who was in charged of product purchasing, quit the company. And [since then] we have not received any new orders from them.”

“I have no idea when the situation will return to normal. It may take another two or three years for the problem to be settled,” he added.

It was reported that the auditors of Trek 2000 in April lodged a report with Singapore’s Accounting and Corporate Regulatory Authority related to documentation deficiencies, relating to some sale transactions between one of its subsidiaries and a customer involving US$3.2 million.

Later in May, Trek 2000 said the authorities were investigating the chief financial officer for possible offences under the Penal Code.

To mitigate the negative impact, Eg said the company is trying to push for its K-card to be used in medical devices approved by the US Food and Drug Administration, such as continuous positive airway pressure (CPAP) machine, Bluetooth blood pressure monitors, electrocardiograms, glucose meters and oximeters.

“Our K-card has the ability to offer online diagnostic services through the cloud for Internet of Things devices or appliances, one of the areas that are fast growing,” he added.

To kick-start its first collaboration, Eg said the company has tied up with France-based Study and Manufacture of Medical Equipment (Sefam) to install the K-card in the CPAP machine for those with sleep apnoea problem.

“The CPAP machine is a device that increases air pressure in your throat so that your airway doesn’t collapse when you breathe in.

“We have yet to ink an official agreement yet. But both parties have spent the past year to study and test the device. It is expected to go on mass production by next year and the contribution should kick in eventually,” he added.

It is understood that Sefam is shipping between 100,000 and 200,000 units of CPAP machines each year. The retail price of the Wi-Fi SD card and USB Wi-Fi Drive is in the range of US$35 (RM155.75) to US$50 depending on the configuration.

Based on an enveloped calculation, should the deal materialise, Key Asic may reap in a minimum of US$3.5 million per year from the deal, which translates into US$875,000 per quarter.

Apart from Sefam, Eg said the company is also seeking to collaborate with E-Top Union Inc, a Taiwan-based company that focuses on optoelectronics, consumer electronic products and electronic products, to push a CPAP product in the Taiwan market.

“We are also looking for new partners in Germany and Italy in the European region, as well as expanding our market across Asia.”

For FY15, the group’s net loss reduced to RM13.92 million from RM34.25 million, and revenue increased to RM19.29 million from RM17.05 million, compared with FY14.

For the third quarter ended Sept 30, 2016, Key Asic recorded a net loss of RM2.44 million on revenue of RM2.89 million. This marked the 28 straight quarter that the company reported a loss.

The repeated failures in the turnaround efforts also did not bode well for Key Asic’s share price. The stock, which rallied in September last year tripling from eight sen on Sept 4 to a peak of 24 sen on Sept 10, eased back to close at eight sen last Friday.

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