CEO Morning Brief

SAM Engineering to Invest Another RM200 Mil in Thai Equipment Business

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Publish date: Fri, 13 Oct 2023, 08:54 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Oct 12): SAM Engineering & Equipment (M) Bhd plans to inject another RM200 million into its equipment business in Thailand in its current financial year ending March 31, 2024 (FY2024) and the following year.

According to the minutes of the group’s annual general meeting conducted on a virtual basis on Sept 27, SAM said that as it continues to win more projects, it may require additional investment. The minutes were filed with Bursa Malaysia on Thursday.

“We have several options to fund our investment, including from internal funds, bank borrowings and raising funds from the public market,” the group had said in response to a shareholder’s question during the meeting.

According to its 2023 annual report, SAM’s capital expenditure in FY2023 stood at RM222.9 million, which it noted was “mainly for capacity expansion of its equipment business in Thailand”.

SAM has three plants in Thailand, two of which are in the Rojana Industrial Park, and the other in Ban Bueng. One plant in Rojana has already been in operation for two years, while the other two plants are scheduled to commence mass production sometime in FY2024.

In response to a separate question concerning the advantages of its Thailand plants versus its plants in Penang, SAM said it addresses the concerns of the group’s customers on placing all manufacturing activities in one place, which would limit its ability to ensure supply to customers.

“The manufacturing facilities in Thailand mitigates this single-location risk, and allow the company to continue its operations under different conditions,” the group said.

“Apart from that, Penang as a semiconductor hub is also facing certain bottlenecks for growth, particularly on skilled manpower supply. Training and developing skillful manpower will be done but will take time.

“Operating in a different geographical area enables the company to tap into a different talent pool, which is important for the company,” it added.

SAM’s total borrowings more than doubled to RM479.5 million as at end-March this year, up from RM211.0 million a year ago, which it mainly attributed to financing the purchase of property, plant and equipment for the expansion in Thailand as well as working capital requirement to support business growth.

Its equipment business in Thailand is operated under its wholly-owned subsidiary SAM Precision (Thailand) Ltd, which manufactures dies, jigs, parts and cutting tools for disk drives, electronics, semiconductors and assembly of modular or complete machines and equipment.

Besides its equipment business segment, SAM operates another business segment of manufacturing parts for the aviation industry, namely aircraft engine casings, nacelle beams and aero structure products.

It is worth noting that in September, SAM announced that it plans to buy aircraft structure parts and precision engineering components manufacturer Aviatron (M) Sdn Bhd for US$43.4 million (RM203.44 million) cash in a related party transaction (RPT).

The acquisition is deemed an RPT as SAM is purchasing Aviatron from its major shareholder Singapore Aerospace Manufacturing Pte Ltd (SAMPL), which controls 62.49% of SAM.

To fund the acquisition, SAM proposed a renounceable one-for-four rights issue involving 135.397 million new shares at an indicative issue price of RM4.12, to raise RM557.84 million.

The Aviatron acquisition is to take up 36.47% of the rights issue proceeds, with RM200.5 million to repay advances from SAMPL (35.94%), RM149.9 million to repay bank borrowings (26.87%) and RM4 million left to defray expenses relating to the proposals.

Shares in SAM ended three sen or 0.68% lower to RM4.35, giving the group a market capitalisation of RM2.36 billion.

Read also:
SAM Engineering makes cash call to fund RM203m acquisition of aircraft parts maker from major shareholder

Source: TheEdge - 13 Oct 2023

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