Pecca keen to join third national car project

This article first appeared in The Edge Financial Daily, on November 27, 2018.
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KUALA LUMPUR: Car leather upholstery supplier Pecca Group Bhd, which posted a 24.31% year-on-year (y-o-y) jump in its net profit for the first quarter of its financial year 2019 (1QFY19) yesterday, is keen to participate in the third national car project to further grow the group’s business.

The group, which counts Perodua, Toyota, and Nissan among its key clients, is banking on the group’s expertise in the manufacturing and installation of car seat covers to get a piece of the project.

“We have to see which automobile maker [will be] appointed to be the third national car maker ... We have to wait for now before we can approach and submit the proposal to the company,” said Pecca group chief financial officer Leong Wai Ming.

“Seats are very much about safety features, [so] we want to see what the requirements are and we will build the design and pursue their requirements,” Leong told reporters after Pecca’s annual general meeting yesterday.

Pecca has been facing challenges in growing its revenue and profit due to a lacklustre motor vehicle market. In its financial year ended June 30, 2018 (FY18), Pecca’s net profit fell 30.38% to RM10.22 million from RM14.68 million, while revenue retreated 7.78% y-o-y to RM112.67 million from RM122.17 million.

For FY19, the group is starting the year on a more positive note, as net profit in 1QFY19 ended Sept 30, 2018 grew to RM3.47 million from RM2.79 million a year earlier, on stronger contributions from its original equipment manufacturing (OEM), pre-delivery inspection (PDI) and replacement equipment manufacturer (REM) segments. Revenue for the quarter inched up to RM27.14 million from RM26.66 million.

OEM sales grew 11% as the preceding year’s quarter was negatively affected by the end of life of a major car model, it said, while PDI sales jumped 53% due to higher sales from the zero-rated goods and services tax period.

OEM is the group’s largest contributor and accounted for approximately 53% of the total revenue for leather car seat covers, whilst REM and PDI contributed approximately 26% and 21% respectively.

On the merger and acquisition front, Pecca is currently in talks with parties locally and overseas, mainly with automotive industry and leather players. “Either automotive or leather, these are our desired areas. We will see which can bring synergy to the group and enhance our value,” Leong said, adding there are a lot of discussions ongoing, but that nothing is concluded yet.

Pecca shares slipped 0.5 sen or 0.61% to close at 81 sen yesterday, valuing the group at RM148.78 million.