Luster sees bright future

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PETALING JAYA: Luster Industries Bhd, after seeing seven straight quarters of profits following a restructuring exercise in 2012, fell back into the red in the three months ended March 31, 2014 (1QFY14) with a net loss of RM544,000.

However, the high precision plastic parts and components manufacturer sees this as a temporary blip as its shift in focus from serving just the volatile consumer electronics market to the more stable automotive and high-end medical segments begins to yield results.

“Our first-quarter results were hurt by a seasonal slowdown in the global consumer electronics market, which started in 4QFY13 due to geopolitical uncertainties around the world,” its deputy managing director Liang Wooi Gee (pic) told The Edge Financial Daily in an interview.

And as the US and the European economies are still in the process of recovery, Liang foresees that the global consumer electronics segment will only recover towards the end of this year.

“But we are cautiously optimistic that the group will turn around in the second half of this year, with contribution from the other sectors namely auto and medical. Still, the consumer electronics sector will remain a major part of our business as it gives us a large volume,” he said.

Liang expects a recent order from a European client to produce two hygiene product lines and a potential contract from a new auto industry client in the domestic market to contribute “substantially” to this year’s earnings.

Apart from expanding its clientele in the precision plastic parts business to include the auto and medical industries, Luster has also ventured into the construction and mining sectors to help ride out any fluctuations in the various sectors.

Luster had recently announced that it had teamed up with Venturian Minerals Sdn Bhd to explore and carry out mining of tin ore and other minerals on a 200-acre (80.9ha) land in Sungai Senik, Terengganu for a lease period of five years ending on May 7, 2016.

“We are now putting in the renewal of the lease from the Terengganu Land and Mines Department and the Minerals and Geoscience Department,” said Liang.

Under the 60:40 joint venture between Luster and Venturian Minerals, Luster has committed to spend RM5.5 million over the next three years to kick start the project, which will be funded via internal funds and bank borrowing.

“Based on our initial analysis and an old job report, we strongly believe that we will be able to mine tin ore quite immediately. However, it is still too early to estimate [how much it will contribute to the group’s revenue]. Based on an old job report, the recoverable estimated reserve is about 5,355 tonnes [of tin ore] for 100 acres,” he added.

Following this venture, Liang said Luster will continue to scout for new business opportunities to reduce its dependence on its core precision parts manufacturing business.

Liang pointed out that the precision parts manufacturing segment used to contribute some 70% to 80% to the group’s revenue, but this has been reduced over the years to about 50%.

“We are exploring a lot of opportunities to enhance the group’s income further. Because we had only recently (March 2013) climbed out of Practice Note 17 status, so funding-wise it is still difficult for us to approach the banks. We still need to conserve our cash for us to grow the group,” he added.

As at March 31, 2014, Luster’s cash stood at some RM30 million, while its borrowings was RM4.18 million.

Currently, Liang and its two major shareholders, namely Wilson Wee Song He and the family of its managing director and founder Lim See Chea, hold a combined 30% stake in Luster.

“For the last two years, the merger exercise (with Exzone Plastics Manufacturers Sdn Bhd and Winco Group in June 2012) has enabled the group to enhance its earnings as well as to turn around its operations.

“We have been ‘married’ for some two years. The Lim family has been with this company for more than 30 years. We are here to do business. We are still the ones running the show today,” said Liang.This article first appeared in The Edge Financial Daily, on June 30, 2014.