The development of Batu Kawan Industrial Park 3 (BKIP3) showcases Penang’s great success in the industrial sector, according to Prime Minister Datuk Seri Anwar Ibrahim.

“The history of Penang is indeed special, through the Penang Development Corporation (PDC), which has explored the industry relatively early and charted changes in the structure of the country’s economic growth.

“We admit that the surge in industrial programmes and progress in Penang has put pressure on the state’s infrastructure in terms of roads, ports and airports,” he said during the BKIP3 groundbreaking ceremony here on Friday.

Hence, he said the federal government wants to speed up the implementation of the Light Rail Transit (LRT) project and the expansion of the Penang International Airport.

Anwar added that he was also aware of the water problems in Penang, especially in industrial areas such as the BKIP (Batu Kawan Industrial Park).

“The good news is that efforts to develop the new Kerian hi-tech industrial area will bring spillover benefits (investment and economic development) to South Seberang Perai (SPS), including Sungai Acheh.

“The supply of water and energy, which is concentrated from Sungai Perak and the Kerian area, will be carried out by the federal government; therefore, the abundant water supply from Kerian will ‘flow’ to Seberang Perai. So, we (the federal government) will speed up the Perak-Penang water deal,” he said.

Penang Chief Minister Chow Kon Yeow, who was also present, said the BKIP3 is the 10th industrial park developed by PDC, which is a continuation of the BKIP.

He said that BKIP3, which will cost a total of RM2.2 billion, proves the commitment of the Penang state government through PDC, to provide more industrial parks to accommodate the demand from foreign and domestic investors.

“BKIP3, which covers ​​407 acres, will be developed in four phases, of which the first phase of over 60 acres is expected to be completed in 2025.

“The development of BKIP3 is expected to bring positive economic spillover benefits, not only to the entire state of Penang but also to the northern region of Peninsular Malaysia, due to the connectivity of quality infrastructure, such as the North-South Expressway, the Penang International Airport, the Penang Bridge, the Penang Port and the Sultan Abdul Halim Muadzam Shah Bridge,” Chow said.

Source: Bernama

Anwar: Batu Kawan Industrial Park 3 showcases Penang’s industrial sector success

AmBank Research remains upbeat on the technology sector as it believes the semiconductor industry is on a recovery path.

Citing Semiconductor Industry Association (SIA), the brokerage said global semiconductor sales have been improving since March 2023, signalling a gradual recovery within the industry.

“International Data Corp (IDC) forecasts global semiconductor revenue to grow by 20.2% to US$633bil in 2024, driven by improvement in average selling prices and demand for dynamic random-access memory (DRAM) chips and content such as artificial intelligence (AI),” it said.

AmBank Research, which maintained its “overweight” stance on the tech sector, believes the sector has bottomed and demand is expected to recover.

The research house said continuous technological advancements in new products within the automotive and consumer electronics sectors, showcasing cutting-edge chips, novel features and advanced equipment tools, would bolster the sector.

Moreover, it emphasised the positive impact of trade diversion through the “China plus one” strategy, which is proving advantageous for local players as multinational corporations redirect their production hubs towards Malaysia and Vietnam.

AmBank Research added that chip fabrication expansions are currently being supported by rising demand for leading-edge and mature process nodes.

Citing US-based Semiconductor Equipment Manufacturers Industry (SEMI), the research house said the semiconductor market’s revenue would grow at a seven-year compounded annual growth rate of 10% to US$1 trillion by 2030.

“According to SEMI, semiconductor manufacturers worldwide are forecasting new fab expansions in 2022-2026, with higher spending on 200mm front-end equipment, especially in China,” it added.

Additionally, AmBank Research anticipates the demand for new smartphones from American and Chinese brands, which led to bumper earnings in the third quarter of 2023 (3Q23), will continue into 4Q23 and 1Q24.

“Outsourced semiconductor assembly and test players will continue experiencing improving plant utilisation rates and production yields resulting from the onboarding of new products in the second half of 2024 (2H24),” it noted.

The research house expects a sectoral revenue growth of between 15% and 24% in 2024, supported by higher volume loading on new projects as existing and new customers ride on the demand recovery of consumer electronic products.

As for consumer electronics, Ambank Research expects the segment to remain soft in 1H24 due to weak consumer sentiment and an ongoing inventory destocking cycle.

However, it anticipates an improvement in 2H24, supported by the launch of next-generation smartphones and the hardware refresh cycle.

AmBank Research noted some short-term challenges in the automotive sector due to falling demand for electric vehicles (EVs), influenced by high costs and reduced subsidies.

Despite a projected modest growth in 2024, long-term prospects remain positive, driven by EV adoption and the industry’s shift towards carbon neutrality.

AmBank Research believes growth in other industries will help cushion the slowdown in key segments.

“Some players like Pentamaster Corp Bhd are involved in the medical technology (medtech) segment, which is growing from a low base,” it said.

The research firm said companies are seeing substantial growth in the medtech segment due to an increase in demand for automated processing lines and assembly systems for various medical devices and medical products.

Source: The Star

Improving chip sales signals tech recovery

The rebound in demand for tech products could help Malaysia’s trade grow in 2024, but risks of an economic slowdown in the United States and China could result in the demand to become uneven, according to economists.

The Statistics Department yesterday revealed Malaysia’s exports fell some 5.9% year-on-year (y-o-y) or RM7.6bil to RM122.1bil for November 2023, while imports increased by 1.7% y-o-y or RM1.8bil to RM109.7bil.

Exports in October stood at RM126.2bil and imports at RM113bil.

Nevertheless, analysts think manufacturing exports, especially the electrical and electronic (E&E) products, which account for about 80% of Malaysia’s exports, will lift trade figures going into 2024, underpinned by the demand for semiconductors.

iFAST Capital expects global chip sales to grow rapidly in the next two years owing to the structural increase in demand from increasing digitalisation.

“We expect an 8% y-o-y growth in semiconductor exports in the first quarter of 2024 (1Q24).

“We anticipate that excessive adjustments to production levels will contribute to higher sales numbers in the future as chipmakers are currently underestimating the long-term impact artificial intelligence will have on chip demand.

In addition, the positive influence of base effects and the massive incentives provided by governments globally would drive higher semiconductor sales growth moving forward. This could potentially buoy chip sales,” said its research analyst Kevin Khaw.As an active player in the downstream part of the global semiconductor supply chain, Malaysia is poised to benefit from the industry’s rebound, he added.

Recent announcements of investment by multiple semiconductor giants such as Intel, Infineon, Texas Instruments and Nvidia indicate Malaysia’s strategic positioning to scale in the world semiconductor growth and benefits from the China and United States plus one reshoring activities.

Khaw is expecting the New Industrial Master Plan 2030 to serve as a blueprint for Malaysia’s semiconductor roadmap in the next seven years.

This could buoy both exports and imports in the semiconductor space (approximately 14% y-o-y growth in 2Q25) while maintaining a 2% y-o-y growth in terms of exports and imports in the next two years, he added.

That said, given the continuing weak trade numbers in November, Malaysia’s gross exports and imports are estimated to have declined by 7.6% and 6.2% in 2023, marginally better than the Finance Ministry’s projections (gross exports: minus 7.8%, gross imports: minus 6.8%) contained in its 2024 Economic Outlook report.

The main cause is the slowdown in the global economy from 3.5% in 2022 to 3% in 2023 estimated by the International Monetary Fund (IMF).

Given that world economic growth in 2024 is forecast to remain at about the same level as 2023, the pick-up in global trade from around 1% in 2023 to 3.5% in 2024 projected by the IMF may be more muted, said Sunway University professor of Economics Dr Yeah Kim Leng.

“Consequently, the around 5% rise in Malaysia’s gross exports and imports expected by the Ministry of Finance may be a tad optimistic unless the Chinese economy, Malaysia’s largest trading partner, picks up steam in 2024,” he told StarBiz.

He added the more moderate growth among Asian economies led by China and India, and possibly Japan could provide the impetus for increased regional trade volume next year as stocks diminishes and supply chains stabilise.

In short, due to low base effects and moderate rise in external demand, Malaysia’s trade performance is forecast to grow by 3% to 5% in 2024.

Yeah believes that the more positive outlook for the E&E sector will underpin the likelihood that Malaysia’s gross domestic product growth in 2024 will exceed this year’s growth estimated at 4% to 4.2% (actual 3.9% in the first three quarters).

Malaysia’s merchandise trade expanded over 20% over two consecutive years in 2021 and 2022 before the cyclical decline in 2023.

Both exports and imports are forecast to expand moderately by 3% to 5% in 2023 due to restocking and supply chain normalisation amidst soft global growth.

Yeah pointed out the anticipated strengthening of investment activities are also expected to lead to improved trade in intermediate and capital goods in 2024.

Japanese investment bank Nomura in a recent report, noted it expects the tech-led tailwind to augment export growth in the 1H24 for Asia, followed by softer momentum in the second half, when it expects a mild US recession to unfold.

Overall, the bank is fairly optimistic that export growth in 2024 should be better than in 2023, given the starting point.

The positive tailwinds for the global economy are visible in the economic indicators.

Nomura’s leading index of Asia ex-Japan’s aggregate exports, or Neli for short, which has a three-month lead time, rose for a third consecutive month to 88.4 last month, signalling positive growth momentum ahead underpinned by an upswing in the global tech cycle.

It pointed out that South Korea’s semiconductor exports rebounded into positive territory in November (plus 10.8% y-o-y) for the first time in 15 months, but warned not to get too optimistic of the momentum going forward.

“Despite rising for the third time in a row, Neli’s latest reading remains quite low, suggesting that, on aggregate, Asia’s export growth could remain below trend over the next few months, especially considering the risk of another economic dip in China,” it stated.

Policy action may already be in the works for the ailing Chinese economy.

The move by large state-owned banks in China to cut their deposit rates by 10 to 30 basis points recently lays the groundwork for the People’s Bank of China (PBoC) to cut its policy lending rates in January as Beijing becomes increasingly concerned about the downward pressure on economic growth, Nomura said, lending support to its view of another growth dip there.

The lasting disinflationary pressures and a sharp pivot by the Federal Reserve on rates there have lowered the hurdle for the PBoC to cut rates, it added.

Khaw of iFAST also thinks high priced exports of commodities such as crude palm oil and crude oil will lead to an increase in export earnings in 2024, and positively impact the ringgit exchange rate, notwithstanding the potential investment inflows into the capital market of these sectors, which will also boost demand for the local unit.

Source: The Star

Manufacturing exports to lead the way

D&O Green Technologies Bhd’s headquarters and production facility are located in the Batu Berendam Free Industrial Zone in Melaka.

While the home-grown company may not employ as many workers or have manufacturing facilities as vast as its semiconductor neighbours Infineon Technologies AG and Texas Instruments Inc just down the road, it has definitely made an impact on the global automotive light emitting diode (LED) stage through its 90%-owned subsidiary Dominant Opto Technologies Sdn Bhd (Dominant Malaysia).

The group commands a 7% share of the global automotive LED market. It is currently the fourth-biggest player behind Germany-based Osram, Japan-based Nichia and the Netherlands-based Lumileds and has ambitions to move up the ranking in the future.

“We’re lucky to be in the automotive space because of the current climate commitments that have pushed electric vehicles (EVs) to the forefront. There is a lot of upside for us,” says D&O group managing director Tay Kheng Chiong in an interview with The Edge at his office in Melaka. He is also a director and non-executive deputy chairman of Mega First Corp Bhd (MFCB).

Indeed, with the global push towards EVs via government policies as well as commitments by the automakers themselves, D&O finds itself in a sweet spot, thanks to its early lead in the automotive LED segment.

“Five years ago, a car would only require 500 to 1,200 LEDs. Today, a BMW i7 easily has 1,500 LEDs. It is not just about the growth [of EVs] across the region, but also a structural shift in the way cars are made, where more LEDs are used,” says Tay.

Notably, the red, green and blue (RGB) LEDs found in the interior of the BMW i7 are produced by D&O. Unlike many other semiconductor companies in Malaysia, which are typically contract manufacturers, the group manufactures the LEDs under its own brand.

Tay is not worried about a potential recession slowing the group’s progress as he believes that in good times or bad, the global EV agenda will continue to power ahead given the pledges made by car makers and governments to address the climate change crisis. “As long as the EV agenda moves forward, so will D&O,” he says, adding that there is a lot of excitement for the group moving forward.

SEMI, the global microelectronics industry association, forecasts that between 2023 and 2030, the global semiconductor industry is expected to grow at a compound annual growth rate of 10%, driven by artificial intelligence (AI), automotive and industrial applications, 5G, high-performance computing and edge computing.

Tay sees D&O’s smart LED segment growing rapidly in the next few years. Smart LEDs are those that have an integrated circuit and LED embedded in a single package.

“The next stage in automotive LED technology is system integrated packages. Our smart LED is the beginning of that, where you can integrate more functions and solutions into the LED. The solution of the whole system will be simpler in the future, especially with EVs,” he explains.

BMW’s iX series was D&O’s big break in the smart LED segment. Tay notes that the product has actually been many years in the making since the German marque approached the group to manufacture smart LEDs back in 2015.

The smart LED segment currently makes up a negligible portion of D&O’s sales revenue, but the group expects its contribution to increase to 15% of its sales revenue by 2025.

In a Dec 5 report, PublicInvest Research says D&O’s smart LED sales volume is expected to surge more than 140% year on year (y-o-y) to 85 million units in 2024, accounting for 6% of its FY2024 sales forecast.

“D&O’s smart LED has been successfully qualified by another German automaker. As more car makers are shifting to EVs, smart LED is expected to see strong demand in the coming years as it reduces the connectivity in the car by up to 50%, which can help reduce power consumption and fits well into the definition of the energy-friendly EV concept,” says the research house.

D&O has undoubtedly worked hard to get to where it is today. It invests heavily in research and development (R&D) and keeps abreast of market trends to make sure it is in tune with its key customers.

Tay believes the marketing function of the group is a crucial part in finding out what customers want and it is from there that R&D can take place to cater to those needs. D&O has regional sales offices in seven countries and employs more than 2,700 people.

“Gone are the days when the R&D department develops a product and then tries to sell it to customers. These days, customers are so proficient that you need to know what they want before working out with the R&D department on whether you can create distinctive features for the customer,” he says.

“We spend about 4% of our revenue on R&D. If we have more money, we will spend more because it will help accelerate our pace to move up the ranks. We are in the technology industry and it is expensive because it’s not just about R&D in products, but in materials as well as areas like failure analysis labs and reliability labs. The investment is huge.”

Typically, the gestation period for a first-of-its-kind product, such as the smart LED, is about five years. “The process cannot be rushed,” he adds.

Tay points out that it is normal to encounter hiccups at the beginning stages of mass production and calls it the “tuition fee” the group has to pay to get it right. “This is why the barrier to entry is high in this business — not anyone who wants to do it can get it done.”

D&O’s business model hinges on differentiation and the group is always on the lookout for what Tay calls a “distinctive feature” in order to stand out from its competitors. It is one of two global automotive LED manufacturers that offer a full range of colour spectrum and brightness intensity catering for both interior and exterior applications for automobiles.

“It is either cost leadership or differentiation, you cannot be in between. As we are in a small country without the market size, we have to focus on differentiation. Our product needs to be different and distinctive in terms of brightness and features,” says Tay.

Diversified customer base

About 99% of D&O’s revenue is derived from the automotive industry outside of Malaysia. It serves about 101 customers, 15% of which contribute about 70% to the group’s revenue.

Tay says the group is aware that it also has to pay attention to its smaller customers because it is from this pool of auto manufacturers that some will turn into big contributors to its revenue one day. “About 5% of them will move into the top 15% of customers, so we need to make sure that we take care of these customers, especially those in China, because new players are emerging rapidly.”

Nevertheless, Tay is not interested in capturing a slice of the pie that is all the different brands of Chinese car makers — there are more than 70 of them — as he believes many of them will not be able to withstand the competition.

“The nature of China is such that it starts out crowded and then it starts to streamline. We need to be careful not to trap ourselves there because once these companies close shop, you won’t be able to get your money and payment will become an issue,” he says.

Set to see a comeback in revenue

For the first half of the year ended June 30 (1HFY2023), D&O’s financial performance was weak, impacted by slow demand from China. Its net profit stood at RM1.58 million on revenue of RM434.69 million. This compares with a net profit of RM45.83 million on revenue of RM483.67 million a year earlier.

The group experienced overcapacity during that period as the typical surge in orders that usually happens at the end of the year did not occur in 2022 due to the prolonged lockdown in China.

Plant utilisation was at 75% in 1HFY2023. As the group’s gross margin fell to just 16% in 1HFY2023 from 28% a year earlier, its net profit was also impacted. However, based on its financial performance in 3QFY2023, things seem to be recovering.

The group’s revenue for 9MFY2023 amounted to RM706.64 million, slightly less than the RM735.83 million it achieved a year earlier. Net profit was weaker by 67%, recording RM19.82 million compared with RM61.59 million in the previous corresponding period. The weaker net profit was a result of the weak earnings in 1HFY2023 as it was not able to achieve economies of scale with the lower plant utilisation.

In 3QFY2023, the plant utilisation improved to 81% and Tay sees it hitting almost 90% in 4QFY2023. This means its gross margin will improve significantly given the improved utilisation rate in the second half of the year.

“Economies of scale play an important role in catching up on the margin gap. Margin performance is highly dependent on the utilisation rate,” he says.

For the full year 2023, Tay hints that revenue is likely to exceed the RM983.02 million achieved in 2022. “In fact, we foresee that we will achieve record revenue in 4QFY2023. The gross margin for 4QFY2023 will reach 26% to 27%,” he says.

PublicInvest Research estimates FY2023 revenue to come in at RM1.03 billion while core net profit is projected to be RM57.9 million. The research house believes D&O’s gross margin should normalise to the 27%-28% range in FY2024 compared with an estimated 21% this year, underpinned by an improvement in capacity utilisation, better margins from smart LEDs and headlamps, and higher productivity with more automation in place.

Tay says it is impossible for plants like that of D&O to be fully automated because of its high product mix. “We have about 7,000 to 8,000 parts. It is not possible to be fully automated but we use a lot of Industry 4.0 to automate individual processes.”

No place like home

Asked if it has ever crossed his mind to set up operations elsewhere, Tay says Malaysia is the best place for the semiconductor industry.

“Malaysia is the best. There is no other place like this in the region because we have the best ecosystem for back-end semiconductors, which has been around for more than 50 years. You can’t find it even in our neighbouring countries,” says the 59-year-old.

Interestingly, while D&O’s peers in Penang have a shortage of talent, it is not an issue in Melaka, says Tay. “We have several universities here that produce good graduates,” he adds.

With the two multinational semiconductor companies just a stone’s throw from D&O, Tay says it does have to try to boost its remuneration package by other means to attract talent. But he is aware that the group cannot compete with MNCs in terms of salaries.

“We can complement the salary but not compete because if we were to raise the salaries of our employees, the MNCs would just put out a better offer. Fortunately, we have an ESOS (employee share option scheme) to help us complement the salary,” he says.

The biggest challenge is all the unpredictable events, Tay opines. However, he believes this is just part and parcel of doing business. “As long as you have your own space, make it the best. That’s the only way.”

Notably, D&O’s largest shareholder is MFCB executive chairman Goh Nan Kioh, with a 30.3% stake as at March 31, 2023.

D&O’s share price had shed 16.9% over the past year to close at RM3.55 last Thursday. This values the group at RM4.4 billion.

In terms of price-earnings ratio, D&O is trading at a trailing 12-month PER of 140.94 times — one of the highest in the technology sector. Based on Bloomberg consensus, it has a forward PER of 83.26 times.

According to Bloomberg data, there are currently three “buy”, two “hold” and one “sell” calls on D&O, with an average target price of RM3.62. PublicInvest Research has the highest target price at RM4.37 while Kenanga Research has the lowest at RM2.30.

Success in automotive LED segment a result of endurance and hard work

D&O Green Technologies Bhd group managing director Tay Kheng Chiong is big into endurance road cycling. He spends his weekends clocking in many kilometres in rides and even has a target on the distance he aims to achieve each year.

“We’re close to the end of the year now. If I am still far from my target, I’m going to be cycling many kilometres this weekend. This is one of the things I do to push myself every year,” he jokes.

In many ways, there are a lot of similarities between his passion for endurance road cycling and how he and his team have managed to grow D&O to where it is today. Both require great amounts of stamina and drive to push ahead to reach the next level.

Notably, D&O did not start off as a light-emitting diode (LED) maker for the automotive industry. In 2000, Dominant Opto Technologies Sdn Bhd (Dominant Malaysia) was established, starting out as an original equipment manufacturer (OEM), with Tay being a main co-founder.

Dominant Malaysia is the principal operating subsidiary of D&O, which holds a 90% stake. Tan says: “This company went through a steep learning curve. We started off as an OEM and wanted to be a contract manufacturer, but that didn’t work out because an American customer who gave us a contract couldn’t fulfil it. So, that was when we made the big decision to opt into being an original brand manufacturer (OBM).”

Tay says pivoting to an OBM was definitely a big decision for the company because it lacked the branding on the global market, as it was still trying to break into the LED market.

Nevertheless, through pure persistence and armed with good technology, the company secured a contract with Samsung Electronics Co Ltd.

“In 2004, Samsung released its slide mobile phone with a camera feature and a built-in LED flash — that was the first in the world. Almost 60% of the LED flash came from us,” says Tay.

Asked how he managed to secure the contract from the electronics giant, Tay says it was a lot of hard work.

“Once a month, I would fly to South Korea to meet up with them. We were bootstrapping at that time — we did not have much money and I remember that, on one occasion, my colleague booked me a cheap motel, which I thought was great because I was thinking about the amount of money we have saved.”

As it turned out, Tay’s colleague had unknowingly reserved a motel in the red light district, which caught him by surprise as well.

While he looks back at these incidents and laughs about it, he admits that it was a really tough time, with little money in his back pocket and not knowing whether his many trips would pay off.

Being in the consumer market, the competition comes rolling in fast and, soon after that first contract with Samsung, many other South Korean players started to enter the market as well.

In 2008, the company moved into the TV segment, in which it supplied LED thin-film-transistor backlights.

“At that time, nobody knew who Hisense was, including us. They came to see us in January 2008 to supply them LED backlights for TVs. They had a grant from the government and it was a fair bit of money, but it came with the condition that the TV must be released to the market before the Beijing Olympics in August 2008,” recalls Tay.

That period of time was what Tay calls high pressure, as the group had roughly six months before the TV was to be released to the market, but they pulled it off and Hisense became the first TV manufacturer to introduce LED backlights for TV with D&O’s technology.

Three years later, D&O exited the consumer market, which was becoming crowded with the emergence of Chinese players. It was an intentional decision, and Tay says the company has learnt tremendously from that experience.

D&O was also a supplier to Philips Lighting, which wanted to introduce LED bulbs in 2012. At one point, close to 90% of Philips LEDs sold in Walmart came from D&O.

It was only in 2013 that D&O turned its focus on the automotive LED segment. While it had the technology to manufacture automotive LEDs, it had to put it on hold prior to 2013 because of a patent dispute with German LED maker Osram Licht AG.

“Between 2004 and 2006, we went through a court case with Osram in the US International Trade Commission (ITC) and, subsequently, another one in Germany between 2008 and 2011. Finally, we managed to settle the patent dispute with Osram amicably — a handshake through cross-licensing — and moved on,” says Tay.

On Aug 29, 2013, Osram and Dominant settled their patent dispute and the former licensed certain patents to the latter. The arrangement meant that Dominant would be allowed to assess several other technologies that would be able to enhance its product portfolio.

In 2012, D&O steadily moved into the automotive LED segment. As a testament to its capabilities, BMW came knocking on its door in 2015, seeking it out as a supplier of smart LEDs.

“When BMW came to see us and asked whether we would like to work on smart LEDs for them, the answer was ‘yes’, even though at that time we didn’t really know how to do it. We found a solution in the end, and what you see in the iX and i7 today is from us. The i5 is coming soon, and so is the new Mini,” says Tay.

Today, D&O has 101 customers from the automotive industry, with 99% of its revenue derived from the automotive segment.

Tay credits the group’s success to its core team, who have been with the company for more than 15 years and continue to be innovative and creative and to have a critical mindset. 

“These attributes are the critical success factor for us to be ranked fourth among automotive LED players in the world today,” says Tay.

Source: The Edge Malaysia

D&O’s future looks bright with global EV agenda

Wentel Engineering Holdings Bhd plans to build a new manufacturing plant largely from the proceeds of its initial public offering (IPO).  

The company today signed an underwriting agreement with TA Securities Holdings Bhd for its IPO on Bursa Malaysia’s ACE Market. 

The IPO entails a public issue of 273.2 million new shares and an offer for sale of 46 million existing shares.  

Of the 273.2 million public issue shares, 57.5 million will be made available to the Malaysian public via balloting, 33 million for eligible directors, employees and other persons who have contributed to the success of Wentel Engineering and its subsidiaries, and 38.95 million by way of private placement to selected investors. 

The remaining 143.75 million are allocated for Bumiputera investors approved by Ministry of Investment, Trade and Industry.

TA Securities will underwrite a total of 57.5 million public issue shares, being the portion made available to the public via balloting. 

“Proceeds from the IPO will be utilised to part finance the construction of two blocks of single-storey factory (with double-storey office) and two blocks of workers’ hostel (new manufacturing plant).  

“The new manufacturing plant is expected to provide the Wentel Engineering with net additional built-up area of approximately 254,381 sq ft for its operations and workers’ accommodation.”

The company will also utilise the IPO proceeds to part finance the purchase of new machinery and equipment for the new manufacturing plant. 

Wentel Engineering executive director Wong Chun Wei said the underwriting agreement is a milestone for the company as it brings it one step closer to being a listed entity. 

“The IPO will provide funding for our expansion and enable the public to participate in our group’s future growth. 

“Our focus is to establish the new manufacturing plant as well as purchase new machinery and equipment to address opportunities in Malaysia and Singapore targeting existing and new customers. 

“Meanwhile we will continue to leverage on our core competencies and strengths in the fabrication of semi-finished metal products, fabrication of metal parts and assembly of finished products to further grow our business moving forward,” he added. 

Wentel Engineering is principally involved in the fabrication of semifinished metal products, fabrication of metal parts and assembly of finished products for the manufacturers of several industries such as security screening equipment, computer numerical control (CNC) machines, semiconductor manufacturing equipment, medical diagnostics equipment, passenger coaches and industrial 3D printers. 

TA Securities, besides being the sole underwriter of Wentel Engineering’s IPO, is also the principal adviser, sponsor and placement agent for the exercise.

Source: NST

Wentel Engineering to build new plant from IPO money

Aurelius Technologies Bhd (ATech) will continue to invest in technology infrastructure as the electronic manufacturing services (EMS) provider remains prudent and cautiously optimistic navigating through the unpredictable global market.

Its plans to diversify and enhance its Internet of Things (IoT) infrastructure while its automotive manufacturing segment will undertake more selective investments to help the group onboard new customers and projects to manufacture components for electric vehicles.

As at Dec 11, 2023, ATech’s order book stood at about RM473mil.

For the quarter ended Oct 31, ATech posted 25% year-on-year (y-o-y) drop in revenue to RM98.8mil, with its communication and IoT products contributing RM79.05mil or 80% to the revenue.

Its electronic devices contributed RM16.2mil to revenue and semiconductor components the remaining RM3.55mil.

Despite a decline in revenue, ATech managed to retain a pre-tax profit of RM13.5mil, largely attributed to its operational cost optimisation measures and the strengthening of the US dollar.

ATech’s net profit for the quarter, however, fell 21% y-o-y to RM9.7mil or an earnings per share (EPS) of 2.47 sen.

Year-to-date, the group posted a decline of 12.4% y-o-y in its revenue to RM302.46mil.

For the nine-month period, communications and IoT products remained as the main contributor at RM243.2mil, followed by electronic devices at RM42.23mil and semiconductor components at RM17.03mil.

The group recorded a gross profit of RM35.1mil for the nine months on the back of the increasing total percentage of contribution by the electronic devices.

This was largely attributable to the deferment of orders as customers are believed to prioritise the depletion of their high inventory holdings.

ATech’s net profit for the nine months rose 6.17% y-o-y to RM28.31mil or an EPS of 7.2 sen. It did not declare any dividend for the quarter.

Source: The Star

ATech to diversify and enhance IoT infrastructure

TSA Group Bhd, a distributor and supplier of ferrous and non-ferrous metal and other industrial hardware products, as well as a manufacturer and processor of stainless steel pipes and other metal products, aims to raise RM42.53 million from its initial public offering (IPO) on the ACE Market.

TSA group managing director Chew Kuan Fah at the prospectus launch today stated, “The main objective of this listing exercise is for TSA to enter the Malaysian capital market and for business expansion.”

He said that from the RM42.53 million raised, 47% of it will be used to repay existing borrowings within five months of the listing. He explained that the move is a step towards solidifying the group’s financial base, reducing debt, and minimising interest costs, thereby enhancing financial resilience.

Another 29% of the proceeds raised are allocated towards strengthening its working capital over the next 36 months and in improving operational efficiency.

Simultaneously, it is investing 12% of the proceeds into the establishment of its Semenyih manufacturing premises.

Chew said that this investment is part of its growth strategy, and the plant will begin operations within 24 months post-listing. The remaining funds will cover the listing expenses.

TSA group primarily adopts a direct distribution channel. Customers buy its products for use in fabrication (47.5%), manufacturing (16.1%), construction (5.0%), and plant maintenance (4.6%).

Malaysia is TSA’s largest market, accounting for RM182 million (77.6%), RM239.7 million (79.2%), RM293.6 million (82.2%) and RM178.5 million (81.0%) of its total revenue in FY20, FY21 and FY23 respectively.

Its subsidiary, TSA Industries serves customers in Malaysia and other countries with the exception of Singapore and Batam, Indonesia which are mainly served by its subsidiary TSA Singapore.

In FY21, FY22 and FY23, Singapore was the group’s largest foreign market, contributing RM30.2 million (10%), RM39.6 million (11.1%), and RM32.7 million (14.8%) to its total revenue, respectively.

However, previously in FY20, Thailand held the position of its largest foreign market representing RM20.3 million (8.7%) of the company’s total revenue for the year.

Of the 77.33 million new shares, 15.46 million ordinary shares are open for application by the Malaysian public, another 15.46 million for eligible employees, 38.66 million via private placement to bumiputera investors approved by the Ministry of Investment, Trade and Industry, and 7.73 million through private placement to selected investors.

TSA will have a market capitalisation of RM170.12 million upon listing based on the issue price of RM0.55 per share.

AmInvestment Bank Bhd is the principal adviser, sponsor, underwriter, and placement agent for this IPO exercise.

TSA is scheduled to be listed on the ACE Market on Feb 2, 2024.

Source: The Sun

TSA Group aims to raise RM42.5 million from IPO

Sarawak will produce green hydrogen on a large scale mainly for the Japanese market under a tripartite agreement inked between Sarawak Economic Development Corp (SEDC) and two Japanese firms.

The tripartite agreement, which involved SEDC’s wholly-owned subsidiary, SEDC Energy Sdn Bhd, Japan’s oil firm Eneos and trading house Sumitomo Corp, signifies a strategic alliance for the H2ornbill project within the Sarawak H2 Hub framework in Bintulu.

This SEDC-led initiative aims to establish a robust and environmentally sustainable clean hydrogen supply chain, according to the state-owned agency.

The agreement outlines a comprehensive strategy to generate approximately 90,000 tonnes per annum of clean hydrogen, with 2,000 tonnes allocated for local consumption in Sarawak and the remainder for the export market.

SEDC Energy will take a key role in overseeing the technical aspect of hydrogen production, with a focus on integrating and optimising the energy procurement process to ensure efficient project execution.

Eneos will provide technical support for the production, and also contribute proprietary technology to transport the hydrogen by sea at room temperature. Sumitomo, on other hand, will evaluate project feasibility and financing.

Eneos and Sumitomo will consider establishing a special-purpose company with SEDC Energy to undertake the mega-project, one of the two hydrogen projects planned for Sarawak H2 Hub.

“The goal is to commence clean hydrogen production by 2030, and all the involved parties will enter the front-end engineering design (Feed) phase.

“Bintulu was chosen as the hub’s location due to the existing petrochemical industrial complex, which offers the advantage of utilising current facilities for methylcyclohexane production, a means of transporting hydrogen to Japan,” said SEDC.

According to SEDC, the availability of hydroelectric power is the driving force behind the participation of Eneos and Sumitomo in the Sarawak H2 Hub project as the state’s hydro-powered grid system will ultimately produce cleaner hydrogen, making it an attractive prospect for the investors.

The hydropower will be used to electrolyse water to produce green hydrogen without emitting carbon dioxide.

SEDC said the H2ornbill project aligns with Malaysia’s New Energy Transition Roadmap and Sarawak’s Hydrogen Economy Roadmap, which is aimed at propelling Sarawak to become a developed state by 2030.

This collaborative effort, said SEDC, will bolster Malaysia’s clean energy aspirations as acknowledged within the national policy framework.

On the sidelines of the recent Asia Zero Emission Community or Azec in Tokyo, Sarawak Deputy Minister for Energy and Environmental Sustainability Datuk Dr Hazland Abang Hipni highlighted the significance of the SEDC Energy-Eneos-Sumitomo partnership to Japan Economy, Trade and Industry Minister Ken Saito during a courtesy call on the latter. Officals from Eneos, Sumitomo and SEDC Energy also presented updates on the H2ornbill project to Saito.

Besides H2ornbill, Sarawak Energy is also in collaboration with three South Korean multinationals, namely, Samsung Engineering, Posco and Lotte Chemical to develop a green hydrogen derivative facility known as H2biscus project.

The project has also earlier this year completed its feasibility studies and progressed to the Feed phase.

According to Sarawak Premier Tan Sri Abang Johari Tun Openg, the final investment decision on the H2biscus project and H2ornbill project is expected to be made in first-quarter 2024 (1Q24) and 2Q25, respectively.

He said the two projects, which would be the cornerstone of Sarawak’s green hydrogen economy and a benchmark world-scale project, have the potential to produce up to 238,000 tonnes of green hydrogen per annum.

Other than producing hydrogen, he said H2ornbill and H2biscus plants will also create new hydrogen-based industries, such as the manufacturing of electrolysers, fuel cells and the green chemical indutry.

Last month, Abang Johari said the H2ornbill and H2biscus projects are expected to generate an additional RM2.4bil to Sarawak’s gross domestic product by 2030.

SEDC Energy is also developing a hydrogen production plant and refuelling station to support the Kuching Urban Transportation System (Kuts) in Rembus, Samarahan Division. The plant project is expected to be completed in 2025.

The Kuts, comprising three lines, is estimated to cost RM6bil and will utilise a hydrogen-power autonomus rapid transit (Art) system (a hybrid of train, bus and tram).

The ART is expected to be introduced in stages from 4Q25, starting with the Blue line and followed by the Red and Green lines, covering a total of 70 kms.

Source: The Star

Sarawak to produce green hydrogen for Japan

Halal pharmaceuticals are ranked 2nd after the food industry in terms of size, says Amrahi 

The halal pharmaceutical industry in Malaysia has grown and developed in recent years. Focusing on adhering to Islamic principles in the production and distribution of medicines, Malaysia has become a leader in halal pharmaceuticals, supported by stringent certification processes, regulatory bodies and industry collaboration. 

The Evolution of Halal Pharmaceutical

Malaysian halal pharmaceuticals have gone a long way and it is under the jurisdiction of the Department of Islamic Development Malaysia (Jakim). 

Malaysian Pharmacists Society (MPS) president Prof Amrahi Buang said the industry has evolved since the introduction of the Halal Pharmaceuticals Standard MS2424 in 2012, expanding to include biopharmaceuticals in the 2019 edition. 

“Halal pharmaceuticals are ranked second after the food industry in terms of size, while the uptake has increased from year to year since 2012,” he told The Malaysian Reserve (TMR). 

Meanwhile, Farmasi Al Arif Sdn Bhd CEO Muhammad Farahi Arif said the industry’s growth is notable, with the Malaysia export value of halal pharmaceuticals reaching RM401 million in 2019, compared to RM395 million in 2018. 

“The growth can be attributed to rising global demand for halal-certified products, including medicines and healthcare items. 

“The rising Muslim population worldwide and the supportive government initiatives also facilitate the development of the industry,” he told TMR. 

Muhammad Farahi also emphasised the preventive care segment’s growth, reflecting a broader market shift towards holistic health approaches.

Leading the way are key players such as Duopharma Biotech Bhd, Pharmaniaga Bhd, and Ain Medicare Sdn Bhd, together with the Halal Development Corp Bhd (HDC) playing a crucial role in supporting the industry at both national and international levels, while also paving the way to more new players in the halal pharmaceutical industry. 

Ideal Nauticare Sdn Bhd MD Muhamad Faris Badarudin said robust regulatory frameworks, international collaborations, effective marketing highlighting halal certification, and active participation in global trade events further enhance Malaysia pharmaceutical’s presence. 

“Leveraging Islamic finance support, Malaysian companies continually invest in technology and production capacities, solidifying their role as key players in the expanding global halal pharmaceuticals sector,” he said. 

Meanwhile, a source in the industry told TMR that industry leaders not only demonstrate a commitment to halal compliance but also underscore their standing as key players shaping the landscape of the halal pharmaceutical sector in Malaysia. 

“This surge in interest extends beyond local markets, with companies aiming to penetrate the international markets, reflecting the industry’s broader reach and potential for sustained development,” he added. 

Jakim Certification Processes and Standards

To achieve halal certification, pharmaceutical products must be registered with the National Pharmaceutical Regulatory Authority (NPRA) before undergoing a voluntary halal audit by Jakim. 

“The certification decision is business-driven. Jakim has comprehensive halal audit guidance in addition to compliance to Halal Pharmaceuticals standard MS2424,” said Amrahi. 

He added that Jakim oversees the certification processes and sets stringent standards for halal pharmaceuticals in the country. 

“These standards encompass the sourcing of raw materials, manufacturing processes, handling, and distribution of pharmaceutical products,” he told TMR. 

Meanwhile, Muhammad Farahi said the NPRA oversees product registration, ensuring adherence to Good Manufacturing Practice (GMP) standards. 

“This covers quality, safety, and efficacy, aligning with the concept of ‘halal toyibban’ in the halal framework,” he added. 

He also stressed the importance of NPRA in making halal certification compulsory, highlighting their role in maintaining the integrity of halal pharmaceuticals. 

“They monitor adherence to halal standards, ensuring all medicines meet the necessary criteria. NPRA makes it compulsory for declaration of any animal sources in pharmaceutical ingredients or products,” he said. 

Muhamad Faris elaborated more on Malaysia halal pharmaceutical’s high credibility and trust which complies with the framework that aligns with international pharmaceutical regulations. 

“This dual assurance of halal integrity and quality from HDC and Jakim enhances Malaysia’s competitiveness in the global market,” he said. 

He added that pharmaceutical companies must meet the requirements of both bodies under the Halal Pharmaceuticals Standard MS2424, incorporating regulatory and halal aspects. 

“Pharmaceutical companies are required to adhere to NPRA’s standards and the Drug Registration Guidance Document (DRGD), which explicitly incorporates the halal parameter to further ensure compliance with halal principles. 

“Bodies like Jakim and State Islamic Department in all states are actively organising discussions, exemplified by events like the annual National Executive Halal conference, further reinforcing the collaborative efforts to ensure the alignment of pharmaceutical practices with halal standards,” he said. 

Although it seems hard to maintain Malaysia as the leading global halal pharmaceutical, Muhammad Farahi said there are also several companies going the extra mile to embrace the challenges in developing the industry such as Duopharma Biotech (manufacturing and logistics) and Farmasi Al Arif (retail and logistic). 

“These entities work together to interpret Islamic principles and apply them to pharmaceutical manufacturing processes, seeking guidance from scholars to ensure compliance,” he added. 

Developments in Halal Pharmaceutical Industry

Amrahi said the government has positioned halal-certified pharmaceuticals as a major economic initiative for post-pandemic economic recovery. 

Halal Pharmaceuticals Standard MS2424, which describes the general guidelines in the manufacturing and handling of halal pharmaceuticals ensures the incorporation of halal principles throughout the manufacturing process. 

This not only guarantees the halal integrity of the final product but also provides industrial players with a competitive edge. 

TMR’s industry source said these initiatives encompass various measures, from providing incentives for companies obtaining halal certification to offering research and development grants, which help foster international collaborations to elevate Malaysia’s position in the global halal pharmaceutical market. 

“The government has implemented the Halal Industry Master Plan 2030 (HIMP 2030), a comprehensive framework aimed at leveraging Malaysia’s strengths for the holistic development of its halal industry,” he said. 

He also said events such as the Malaysian International Halal Showcase (Mihas) play a pivotal role in the industry. 

“Mihas serves as a platform for local and global halal certification bodies to converge, fostering collaboration and promoting the growth of halal industries,” he added. 

As for Muhammad Farahi, he is confident that Malaysia’s halal pharmaceuticals can stay as the main player in the global scene. 

“Malaysia, as a pioneering country in the halal pharmaceutical industry with the establishment of the first standard for halal pharmaceuticals, MS2424:2019 should spearhead the development of the industry, in terms of regulation and production,” he said. 

Role of Halal Certifying Bodies 

Being the pioneer of halal pharmaceutical practices, Muhammad Farahi believes that halal certifying bodies play an important role in verifying and endorsing the halal status of pharmaceutical products in Malaysia by conducting inspections, audits, and assessments. 

Halal certifying bodies in other countries must strictly adhere to Jakim’s requirements, and Jakim recognises the halal logo of a country once the certifying body is recognised. This ensures consistency and reliability in halal certification. 

Malaysian companies face the challenges of meeting global standards, but it also creates opportunities through the OIC/SMIIC Technical Committee on Halal Pharmaceuticals (TC16). 

He said Malaysia, currently leading TC16, plays a vital role in setting global halal pharmaceutical standards. 

“The Malaysian halal logo is the most trusted logo in the world,” he said. 

Meanwhile, Muhamad Faris said in the context of exports, the country leverages its established halal certification processes, combining Islamic standards with international pharmaceutical regulations. 

He noted that Malaysia actively attracts investments, fosters collaborations and supports local companies to innovate in halal pharmaceuticals. 

“This strategic approach not only facilitates the export of halal medicines but positions Malaysia as a centre for advancing research, development and technological innovation,” he said. 

Muhamad Faris also said several Malaysian pharmaceutical companies, notably Pharmaniaga and Chemical Co of Malaysia (CCM), have witnessed success in exporting halal medicines globally. 

However, TMR’s source said Malaysian pharmaceutical companies encounter challenges as they seek global expansion. 

These include diverse halal certification standards and guidelines, a lack of initiatives from foreign governments or authorities, as well as inconsistent enforcement of mandatory halal certification. 

“There are also variations in the approach to halal certification processes and evaluation, differing interpretations of halal standards based on various schools of thought or ‘mazhab’, and a shortage of expertise in navigating these complexities. 

“Despite these challenges, the global expansion also opens doors for Malaysian companies to demonstrate their expertise in producing high-quality halal pharmaceuticals,” he said. 

TMR reached out to Jakim but it was unable to comment by press time. 

Source: The Malaysian Reserve

Malaysia leads global halal pharmaceutical industry

The worst may be over for local electrical and electronics (E&E) companies supporting the artificial intelligence (AI), medical technology devices, automotive, cloud computing and aerospace sectors.

Malaysia Semiconductor Industry Association president Datuk Seri Wong Siew Hai said manufacturers supporting the sectors are restocking their inventories.

“We can expect demand to pick up again gradually,” he said.

The Semiconductor Industry Association has announced that the global semiconductor industry sales totalled US$46.6bil in October – an increase of 3.9% compared with September’s total of US$44.9bil.

However, it was still 0.7% lower than the October 2022 total of US$46.9bil.

Regionally, month-on-month sales increased in China (6.1%), Asia-Pacific and others (4.9%), the Americas (2.9%), Japan (0.6%) and Europe (0.2%).

“A new World Semiconductor Trade Statistics (WSTS) report has also forecast that annual global sales would increase 13.1% in 2024, after falling 9.4% in 2023,” Wong said.

WSTS projected worldwide semiconductor sales to reach US$520bil in 2023 (down from the 2022 sales total of US$574.1bil) and hit US$588.4bil in 2024.

The personal computing, smartphones and consumer electronics sectors have been experiencing flat or contracting sales, according to Wong.

“We will know in the first quarter of next year whether consumer electronics will recover in the second half of 2024,” he added.

Malaysia exported RM484bil of E&E products from January to October, 0.8% lower than January to October 2022.

The E&E trade surplus for the first 10 months of this year was RM193bil, compared with the total trade surplus for Malaysia of RM190bil.

“The semiconductor situation in the country is still good as our E&E exports contracted by a mere 0.8% compared with last year,” he added.

Meanwhile, some local E&E manufacturing companies are bearing the brunt of the global economic slowdown arising from macroeconomic and geopolitical issues.

MMS Ventures Bhd, a manufacturer of semiconductor test equipment for smart devices, expected the challenging operating environment to negatively impact its performance.

“The prolonged global economic slowdown continued to weigh on the outlook of the semiconductor industry.

“Amid all the news on a positive recovery, we expect a challenging operating environment for the rest of the year, which will see our results in the negative,” it said in a filing with Bursa Malaysia.

For the nine months ended Sept 30, 2023, MMS posted a net loss of RM1.99mil on the back of RM10.5mil revenue compared with a net profit of RM8.5mil on the back of an RM46mil revenue in the previous year’s same period.

Elsoft Research Bhd, an automated test equipment (ATE) manufacturer serving the automotive, smart devices, and general lighting industries, said the demand for ATE would remain weak in the short term.

“Despite the short-term challenges, the management is optimistic about the group’s future performance,” Elsoft said in its filing with Bursa Malaysia.

For the nine months ended Sept 30, 2023, Elsoft recorded a net profit of RM7mil on the back of an RM13.8mil revenue compared with RM11.6mil and RM23.2mil achieved in the previous year’s corresponding period.For the nine months ended Sept 30, 2023, vision inspection equipment manufacturer Vitrox Corp Bhd recorded RM103.4mil in net profit on the back of an RM432.6mil revenue, compared with RM151mil and RM560mil achieved in the previous year’s corresponding period.

Vitrox said it was committed to its long-term strategies to strengthen its operations, new product innovation and expand its market. The group expects a robust recovery in the financial year 2024.

Vitrox maintained an optimistic outlook based on the sustained growth in demand from AI, telecommunications and automotive sectors.

Despite weaker reported earnings from the automated test equipment maker, AmInvestment Bank Research remained “positive” on the company given its well-diversified revenue base and exposure to high-growth industries, including computing, telecommunications and automotive segments.

The research house added that Vitrox’s geographical diversity would play an important role in attracting new customers due to trade diversion resulting from the US-China chip war, particularly in Mexico and the Asean region.

As such, AmInvestment expects a gradual recovery and stronger demand in the automated board inspection and machine vision system segments for 1Q24 compared with 2H23.

It has upgraded Vitrox to “buy” from “hold”, maintaining a stable fair value of RM8.40, based on a higher price-to-earnings ratio of 41 times (from 36 times), up one standard deviation above the five-year mean of 32 times on a revised FY24 earnings per share.

Meanwhile, semiconductor test equipment and factory automation manufacturer Pentamaster Corp Bhd is optimistic about concluding the 2023 financial year with another revenue milestone, on the back of an encouraging order book from its automotive and medical device segments.

It saw an uptick in its net profit to RM68.42mil for the nine months ended Sept 30, 2023 from RM59.67mil a year ago while revenue rose to RM522.93mil from RM452.96mil.

However, CGS-CIMB Research kept its “hold” call on Pentamaster, with a lower target price of RM5.24, based on its nine-month results and a recent briefing indicating a slowing growth trend in the automotive sector, due to increasing competition in electric vehicles (EVs).

The research house said Pentamaster’s results for the nine months just ended lagged both its full-year forecast at 63% and the Bloomberg consensus estimate at 58%.

Despite a 47% year-on-year growth in the nine-month automotive revenue, the 30% quarter-on-quarter decline in the third quarter (3Q23) could be a telling sign of moderating EV demand, given the environment of rising interest rates and diminishing subsidy tailwinds.

It said this could be cushioned by the medical segment, which saw a fourfold sequential revenue growth in 3Q23 to RM64mil, an indication of a significant ramp-up in its factory automation solutions works for its main medical customer’s new facility in Penang.

PIE Industrial Bhd remained optimistic in engaging potential new customers from diverse industries in the medical, industrial, consumer and telecommunication sectors.

“Good ongoing discussion is in progress, which could potentially have a very positive contribution to the group’s growth if successfully engaged,” PIE said in a recent announcement.

The company posted a marginal increase in its net profit to RM45.72mil in the nine months ended Sept 30, 2023 from RM42.8mil a year earlier on the back of higher revenue of RM919.76mil from RM823.86mil.

Source: The Star

Upsurge in demand for E&E products