Thursday 28 Mar 2024
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This article first appeared in The Edge Financial Daily, on January 11, 2016.

 

GEORGE TOWN: Kobay Technology Bhd, a tool parts maker, which jumped on the property development bandwagon with its maiden project in Langkawi, Kedah last year, expects the new segment to contribute 50% of the group’s revenue by 2020, from almost nil now.

“We believe that property development is a good sector to enter into, although the property market is currently soft. Our directors have ample experience in this area [and] that is why we felt it was beneficial to move into this sector,” its chief financial officer Lim Swee Chuan told The Edge Financial Daily after the group’s annual general meeting recently.

“We are looking at a 50:50 [revenue] contribution [from the manufacturing segment and the property development segment] in five years,” he said.

Kobay Technology launched its first project called Lavanya Residences in Pantai Tengah, Langkawi, on Dec 12 last year. Spanning 6.3 acres (2.55ha), the project has a gross development value (GDV) of RM240 million.

Phase 1 features 37 serviced villas priced from RM1.3 million to RM4 million per unit, while Phase 2 will comprise 247 apartment units, which is pending approval, Lim said.

The group also plans to launch its second project with a GDV of RM250 million in Seri Manjung, Lumut, Perak, in the third quarter of its financial year ending June 30, 2016 (3QFY16). The project will feature 113 bungalow and semi-detached units, and a 232-unit condominium block.

“This riverside development with units priced from RM800,000 on a 19.5-acre piece of land will be a joint venture (JV) project with the landowner. We are looking at more JV projects like this,” said Lim.

He noted that Kobay Technology has another piece of land measuring 1.5 acres in Tanjung Bungah, Penang.

“However, we will look at it in a year’s time. For now, the two projects are enough to keep us busy. [In the meantime,] we are on the lookout for other pieces of land [to acquire] anywhere,” he added.

For FY15, the group saw its net profit fall 8.5% to RM10.69 million from RM11.68 million the previous year, while revenue rose 18.1% to RM113.92 million from RM96.42 million in FY14.

However, Kobay Technology’s net profit more than tripled to RM2.78 million for 1QFY16, from RM887,000 a year ago, on higher customer orders, currency gain from the weakening ringgit and the disposal of its loss-making China operation. Revenue grew 3.2% to RM25.36 million from RM24.58 million in 1QFY15.

Lim pointed out that within the manufacturing sector, the precision metal components segment contributed 65% to the group’s net profit in FY15.

“We are positive about the growth in this sector for FY16, particularly with increased focus on the aerospace sector, which started three years ago. We expect a growth of more than 20% this financial year,” he said.

The higher profits from the precision metal components segment is expected to offset an anticipated slowdown in the metal fabrication segment, which caters to the oil and gas (O&G) industry, and contributed 25% to the group’s net profit in FY15.

“We expect [performance of] the metal fabrication segment to be slower in the second half of FY16 due to the challenging O&G sector,” said Lim, adding that the segment could see a double-digit drop in profits due to lower incoming orders.

Nevertheless, Kobay Technology expects to report flat profit growth in FY16 amid the current economic uncertainties and challenges.

Kobay Technology shares closed 0.94% or two sen lower to RM2.10 last Friday, with a market capitalisation of RM143.53 million.

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