KUALA LUMPUR (Aug 14): AT Systematization Bhd, which has now posted two straight quarters of losses, is targeting the break-even mark for the full financial year ending Feb 29, 2016 (FY16) amid shrinking orders from hard disk drive (HDD) manufacturers since late last year.
The Penang-based industrial automation systems and machinery manufacturer has seen HDD orders from Western Digital Corp, one of its biggest clients, dropped as much as 40% year-on-year, its executive director Mak Siew Wei said.
“Globally, Western Digital has been slowing down production, and their orders for HDD have also decreased in tandem,” Mak told reporters after the group’s annual general meeting today.
“Generally the HDD market is very soft. So, looking at all these factors, we hope to achieve break even if not better in FY16,” he added.
For FY15, AT Systematization reported a 35.3% fall in net profit to RM719,000 from RM1.11 million the previous year, mainly due to lower customers’ orders in its fabrication of industrial and engineering parts business, particularly from HDD manufacturers. Revenue for FY15 came in at RM23.4 million, up 7.5% from RM21.76 million in FY14.
However, on a quarterly basis, the group swung to a net loss in the fourth quarter ended Feb 28, 2015 (4QFY15), hurt by tough business conditions. The net loss extended to 1QFY16, with the group reporting a net loss of RM534,000 as revenue fell 30.8% to RM4.37 million from RM6.32 million.
Mak said the lynchpin to the group's better financial performance in FY16 is its joint venture (JV) with Singapore-based Fong’s Engineering & Manufacturing Pte Ltd (FEM) entered into in June last year.
Under the partnership, the two parties are to collaborate in the areas of oil and gas, life science, electronics, aerospace and other industries operations, and to position the JV company as FEM’s manufacturing arm outside Singapore to meet FEM’s customers’ job orders and requirements. AT Systematization holds a 75% stake in the JV company, while FEM owns the rest.
“We want FEM to load us with more jobs,” said Mak, adding that the JV company is in the midst of negotiating a contract with a Swiss-based company, which builds components for textile manufacturing machines.
Mak said AT Systematization is also looking to diversify its customers to include glove equipment manufacturers, and expects the diversification to happen by the 3QFY16.
“We will need one more quarter to get it realise,” he said.
Mak had previously said such a move could see AT Systematization forming collaborations involving the designing of a new glove manufacturing system for the local glove industry.
Meanwhile, the group expects its maiden solar power project to be completed by January next year.
The 425kWh solar power project will see one of AT Systematization’s three plants in Bayan Lepas, Penang fitted with photovoltaic power panels. Mak said the project is expected to cost between RM5 million and RM7 million.
In March this year, the Sustainable Energy Development Authority had granted approval to AT Systematization to supply renewable solar energy to Tenaga Nasional Bhd at a fixed rate-tariff of 69.77 sen per kWh and additional bonus rate-tariff ranging from 5 sen per kWh to 17.22 sen per kWh.
The 425kWh project is expected to generate RM11 million during the 21-year concession period, contributing RM500,000 in revenue to AT Systematization a year.
“The ROI (return on investment) is expected to last for five to six years and after that, the contribution is net cash to us,” said Mak.
AT Systematization (fundamental: 1.15; valuation: 0.9) shares closed unchanged at 9 sen today, bringing a market capitalisation of RM36.81 million.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)