GEORGE TOWN: Elsoft Research Bhd is diversifying into the production of embedded controllers for medical instruments and automated test equipment for infrared and laser devices.

Group chief executive officer CE Tan told StarBiz that the group had allocated RM8mil to RM10mil to develop new test equipment and improve on existing ones.

“The new test equipment is currently being developed and should be out in late 2019 or in early 2020.

“Late last year, we received the IEC 60601 certification, qualifying us to produce embedded controllers for the medical instrument market.

“We are also developing a new range of test equipment to test multi-beam digital headlights that are replacing single-beam LED headlights operating on a rotating mechanical system for the automotive industry.

“And, of course, we are also improving the existing range of test equipment used for checking smart devices,” Tan said.

Tan said diversification was necessary, as the group had experienced weakened demand for automated test equipment in smart devices, automotive and general lighting industries for the beginning of 2019 and is expected to slowly recover in second-half 2019.

“We expect to see the contribution of the new products in 2020,” he said.

According to Tan, Elsoft’s customer base is made up of leading corporations and multinational companies (MNCs) in the opto-electronic industries.

“Our top customer, a lighting solutions MNC and its group of suppliers, accounted for approximately 75% of the group’s total turnover for the financial year ended Dec 31, 2018 (FY18).

“However, this customer has been with the group continuously for more than 15 years and this indicates a long-term and stable customer relationship,” Tan added.

Moving forward, Tan added that the group’s performance in the first-half is expected to be softer than the corresponding period of 2018.

According to its 2018 annual report, the group’s inventories increased by 71.1% from RM3.365mil as at FY17 to RM5.758mil as at FY18.

“The increase was mainly due to work-in-progress for projects to be delivered in the first half of 2019.

“The group’s trade and other receivables decreased by 40.2% from RM23.734mil as at FY17 to RM14.191mil as at FY18.

“The decrease was mainly due to significant improvements in collection throughout FY18,” the reports said.

As at FY18, the group’s cash and cash equivalents stood at RM10.187mil, registering a decrease of 18.5% compared to RM12.501mil as at FY17.

“Efficient cash management by placing additional cash into money market funds for better yields has resulted in lower cash and cash equivalents as at FY18,” the report added.

Elsoft’s other investments comprise investments in money market funds, fixed-income funds and quoted investments.

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