KUALA LUMPUR: Penang-based AT Systematization Bhd (ATS), which is engaged in the manufacture and fabrication of industrial and engineering parts, expects profit to grow 10% for the financial year ending Feb 28, 2015 (FY15) after posting a return to profit in its FY14 results.
This growth is underpinned by a customer base expansion following a joint venture (JV) with Singapore-based Fong’s Engineering & Manufacturing Pte Ltd (FEM) in June this year to collaborate in the areas of oil and gas (O&G), life science, electronics, aerospace and other industries operations.
Executive director Mak Siew Wei, 39, told The Edge Financial Daily he expects ATS’ profitability to continue to improve over the coming months, after the group posted a net profit of RM1.16 million for FY14, from a RM10.84 million net loss in FY13.
ATS’ revenue for the period contracted 8.3% to RM23.04 million, from RM25.13 million.
“We are confident that the JV will boost our earnings growth by double digits. This is one of the steps taken to mitigate the risk of depending on one or a few large customers,” said Mak in a recent interview.
“We will leverage FEM’s good relationship with its customers to bring us more. At the same time, the JV company will act as FEM’s manufacturing arm outside Singapore to meet its customers’ job orders and requirements,” he said.
ATS holds a 75% stake in the JV company and FEM the remaining 25%.
Mak also said expansion of the group’s plant is about 60% complete, and will be fully completed by March next year.
ATS has allocated RM6 million in capital expenditure to expand the plant by 14,000 sq ft, which will boost its production capacity to 10,000 units per month from 6,000 units per month currently.
“The [additional] production capacity of the expanded plant is more or less secured with orders through our strategic partnership with FEM,” said Mak.
ATS targets the JV company’s total sales to reach RM5 million in FY16, and subsequently RM13 million in FY17 and RM20 million in FY18.
Mak said the order book of its industrial automation system and machinery business, which accounts for 80% of group revenue, currently stands at RM3 million, that will keep it busy till the next year.
In February this year, ATS raised RM19.6 million via a rights issue with free warrants. The group has also proposed a private placement of up to 10% of its issued share capital, which will allow the group to raise up to RM5.9 million in funds to acquire a viable potential business investment.
Mak said the group is now ready to embark on new business ventures, including in the area of solar energy power farming.
“We intend to diversify our revenue streams by bidding for high-margin businesses and projects with our strategic partner. Should we win, this could provide us with recurring income during the concession period,” he said.
As at Aug 31, ATS’ cash and equivalents stood at RM6.82 million, with a gearing ratio of 0.08 times.
“When I first joined this company on March 1, 2013, I discovered that the company incurred huge losses and had a tight cash flow. What we did was we rationalised our operating cost and streamlined our operations by disposing of non-performing subsidiaries which had been bleeding for the past few years,” said Mak.
To recap, on Feb 28 ATS disposed of its wholly-owned unit AT Engineering Sdn Bhd — which has operations in China and Thailand as well as a business presence in the Philippines and Hong Kong — to Che Ngah Hussin and Mohd Rofi Ramli, resulting in a gain of RM1.098 million.
ATS was recently included in the list of syariah-compliant companies that was issued by the Securities Commission Malaysia on Nov 27.
Shares in ATS closed unchanged at 8.5 sen last Friday, giving it a market capitalisation of RM33.46 million.
This article first appeared in The Edge Financial Daily, on December 8, 2014.