This article first appeared in The Edge Malaysia Weekly on May 9, 2022 - May 15, 2022

EITA Resources Bhd, best known as a manufacturer and service provider of lifts under the brand EITA-Schneider, is looking to secure a partner in a year or two in a bid to strengthen its overseas markets.

“Our recurring income (from service and maintenance) is important. It is not easy to compete with international brands but we are doing it. We are now in the early phase of penetration and we are trying to build our installation base,” EITA managing director Fu Wing Hoong tells The Edge in a recent interview.

Currently, in its overseas markets, EITA supplies only the lift systems and components, but does not take on the installation and maintenance of the systems, unlike in Malaysia where it provides a full suite of services, right from the manufacturing of the lifts to their servicing and maintenance.

Fu believes that before the group can move towards providing a full suite of services overseas, it needs to achieve a minimum number of lifts under its brand name in a market for it to be sustainable.

“We are not a big group and we cannot afford to invest in an overseas market and absorb the loss for a few years before turning profitable,” he says, adding that the gestation period for the lift market is long, typically following the construction project timeline that often takes up to five years.

Fu says new projects are high risk as there are myriad factors that could result in their postponement. In Malaysia, he explains, it is easier for the company to swallow that risk because its other segments of income would help offset potential risks in the lift market, such as its marketing and distribution arm, the manufacturing of busduct systems under its brand Furutec and its high voltage system.

EITA believes the export market is important for its future growth. But Fu is convinced that the way for a company like EITA to grow in its overseas markets is by inorganic means of mergers and acquisitions or through joint ventures.

Thailand is one of the markets he sees as being the closest for EITA to offer a full suite of services, given that it has the highest number of lifts under its brand in that country among its overseas markets. He adds that the group is currently actively searching for a partner there that would meet its requirements.

“We hope we can do it in the next one or two years,” he says.

For the financial year ended Sept 30, 2021 (FY2021), its overseas markets contributed close to 13%, or RM38.42 million of the group’s total revenue of RM302.45 million. The bulk of the revenue from overseas markets came from the Asean region.

The overseas contribution in FY2019, prior to the Covid-19 pandemic, was higher at 19% or RM58.63 million, but it was weighed down by the subsequent lockdowns, which resulted in project postponements.

The group’s target is to achieve RM1 billion in revenue by 2025, with RM700 million derived from existing business segments, of which half would be from overseas markets. The remaining RM300 million would come from mergers and acquisitions.

As the group is actively looking out for potential acquisitions, it is not confining itself to candidates that operate in its current market segments but is also open to those in new market segments under the broad scope of electrical and electronics.

Having said that, Fu also says that EITA wants to grow its lift maintenance business. “That is one part where we want to look into acquisition — acquiring someone with an existing substantial number of lifts.”

While it strategises its overseas market plan, Fu says the group is battling the perception here that local products are inferior, with some choosing international brands instead of EITA-Schneider. However, the fact that EITA has many repeat customers and has won projects like the MRT2 and LRT3 is testament that a local brand can provide quality as well.

For every 10 customers, EITA is also able to retain nine of them for maintenance and services, which is a high percentage according to Fu.

“One of the competitive advantages we have is that we pride ourselves on the maintenance service. When a customer buys a lift, it is not so much about the installation but more importantly, when they call, we can come quickly and solve the issue.

“The service is important. This is what keeps us continually profitable and it’s also our reliability, built upon relationships with customers over the years,” he stresses.

All lifts break down, even those made by well-known international brands. Therefore, service matters. Fu says EITA ensures that its technicians can be at a location in 30 minutes, if someone is trapped in a lift.

With the economy more or less back in full swing, Fu says it is a new environment in the post-pandemic landscape. Rising costs, in addition to delayed projects, adds to the complexity of running a business like EITA today.

Its pipeline of projects looks good but the group has to be careful in managing the challenges due to rising costs in order to keep margins intact, he adds. It has been consistent in keeping its gross profit margins above 25% over the last six financial years, and is looking to continue to maintain margins at above 20% this year.

Fu says things are manageable at this point and that EITA is still confident that while it can continue to grow this year, it will have to cope with the uncertainty of delays and rising costs.

“We are positive (about this financial year) and we are also still looking for growth over last year. But at the end of it, it depends on the environment,” he says.

For the first quarter ended Dec 31, 2021 (1QFY2022), the group reported a net profit of RM8.4 million, a 35.7% increase over the previous year, against revenue of RM120.71 million, up 82% from a year ago.

In FY2019, revenue stood at RM302.4 million while net profit amounted to RM20 million.

EITA’s share price closed at 83.5 sen last Thursday, valuing the company at RM215.81 million.

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