Thursday 28 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on May 2, 2022 - May 8, 2022

PENANG-based Engtek Group is looking into relisting on Bursa Malaysia and has hired RHB Investment Bank as well as Hong Leong Investment Bank to work on it, according to sources familiar with the matter.

“The group aims to make an IPO submission to the regulators earliest by June and is targeting for a listing by this year or early next year.

“The current valuation it is looking at is within the RM400 million to RM500 million range after studying the present market and its earnings trend,” says a source.

It is unclear which unit within the Engtek Group will be the listed vehicle.

Engtek Group was listed on Bursa Malaysia in 1993 as Eng Teknologi Holdings Bhd and was privatised a decade ago, in the second half of 2012.

The privatisation was via the acquisition of the entire business and undertakings of Engtek Group by its major shareholder at the time, TYK Capital Sdn Bhd, which had a 23.21% stake. This was because the stock was deemed to be undervalued.

The privatisation was first announced in July 2011 at an offer price of RM2.50 per share. It was revised downwards in March 2012, however, to RM2 per share, owing to funding issues related to the exercise.

Eng Teknologi Holdings’ net asset value per share stood at RM2 as at June 30, 2012. It was officially delisted from Bursa Malaysia on Oct 4, 2012.

The institutional shareholders of Eng Teknologi Holdings before it was taken private in 2012 were Permodalan Nasional Bhd with a 14.47% stake and Lembaga Tabung Haji with 8.34% as at March 30, 2012.

A search on TYK Capital shows Datuk Teh Yong Khoon listed as a shareholder with a 70% stake, Datuk Teh Yeong Keat with 3% and Positive Carry Sdn Bhd with 27%.

Yong Khoon and Yeong Keat are the son and daughter respectively of the Engtek Group’s late founder Datuk Teh Ah Ba.

According to Eng Teknologi’s 2011 annual report — its last posted on Bursa Malaysia before it was taken private — Yeong Keat held the position of executive chairman  and Yong Khoon was the CEO.

Meanwhile, a company search on Positive Carry reveals that its shareholders include listed ECM Libra Group Bhd with 29.7% interest, and Truesource Sdn Bhd — a wholly-owned unit of Singapore-listed Plato Capital Ltd — with 69.30%.

It also shows that Positive Carry  Limited (a British Virgin Islands incorporated company) has a 1% stake in TYK Capital. Plato Capital’s 2021 annual report reveals that it has a 70% stake in Positive Carry Limited.

This would mean that ECM Libra and Plato Capital have effective stakes of 8% and 18.9% respectively in TYK Capital.

ECM Libra and Plato Capital share a common major shareholder — corporate financier Datuk Lim Kian Onn.

Exited HDD segment in 2019, ended 2021 on a high

TYK Capital’s financials in the five years from 2016 to 2020 have been uneven.

According to company filings with the Companies Commission of Malaysia (SSM), the group registered a net profit of RM7.5 million in FY2016 but its earnings fell to RM889,504 in FY2017.

The company then dropped into the red in FY2018, recording a net loss of RM1.1 million. In FY2019, its losses grew further to RM22.6 million.

The group then returned to the black in FY2020, registering a net profit of RM14.2 million.

While TYK Capital’s FY2021 earnings were as yet unavailable on SSM’s website, Plato Capital’s annual report 2021 says the Singaporean-listed company’s share of profit in TYK Capital amounted to S$2.73 million (RM8.6 million) and it received a S$6.13 million dividend over the course of the year.

Back-of-the-envelope calculations show that its S$2.73 million share of profit (RM8.6 million share based on an exchange rate of 3.16 to the Singapore dollar today) for an effective stake of 18.9% translates into a total profit of about RM46 million.

Plato Capital also noted in the annual report that TYK Capital maintained a robust balance sheet with a net cash position of S$12.09 million at end-FY2021.

Plato Capital’s annual reports also show that the group’s share of loss in TYK Capital amounted to S$1.943 million. It noted that, in 2019, TYK Capital exited its legacy hard disk drive (HDD) segment completely and incurred one-off costs of S$3.012 million as part of the restructuring.

“TYK Capital will focus completely on its industrial products group, which produces higher-margin products for clients in the automotive, climate control, heat sink, camera parts, LED lighting, life science, telecommunication and laser sectors.

“Despite a turbulent FY2019, TYKC maintains a robust balance sheet with net cash of S$1.81 million at the end of FY2019,” says Plato Capital in its FY2019 annual report.

Prior to its privatisation in 2012, Eng Teknologi Holdings had fallen into the red for the financial year ended Dec 31, 2011, incurring a net loss of RM42.6 million compared with a net profit of RM49.1 million a year earlier.

This was due to severe floods in Thailand at the time that had a negative impact on Eng Teknologi Holdings’ operations there. The losses were the group’s first since FY2002.

The impact of the Thai floods on the group’s cash flow also led to the lowering of the offer price to RM2, from RM2.50, for the privatisation of Eng Teknologi Holdings in 2012.

Today, Engtek Group has five manufacturing plants in Penang, Johor and the Philippines, according to its website.

TYK Capital’s roots can be traced back to 1974, when it was established with a start-up capital of RM500. The company’s founder Ah Ba — a trained physician in Chinese medicine whose heart was in mechanical inventions — set up Eng Hardware Electrical behind his clinic in Air Itam, Penang.

According to its website, Eng Hardware’s workshop was set up to produce “jigs and fixtures”.

Fast forward to today, and the group has grown to five manufacturing plants in its stable, employing 1,456 staff, and making CNC precision machining and aluminium die-casting components for both high-mix, low-volume and low-mix, high-volume production.

 

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