Initial Public Offering (IPO)

IPO - Betamek Berhad (Part 2)

MQTrader Jesse
Publish date: Wed, 05 Oct 2022, 10:10 AM

Financial Highlights

The following table sets out the financial highlights based on our combined statements of comprehensive income for FYE 2019 to 2022:

  • The revenue is RM 126 mil for FYE2019, RM 130 mil for FYE2020, RM 129 mil for FYE2021, and RM 133 mil for FYE2022. This show the company basically didn’t expand its market share.
  • The gross profit margin decreased from 26.7% (FYE2019) to 18.4% (FYE2022). The reduction in GP margin was mainly due to high direct material cost, high production labour due to an increase in staff salaries and higher production overheads. (Generally, a GP margin of 20% is considered high/ good).
  • PAT margin decreased from 18.1% (FYE 2019) to 10.1% (FYE 2022).
  • The gearing ratio is 0.3 (FYE 2022) which is under a healthy range (A good gearing ratio should be between 0.25 – 0.5).


Major customer and Supplier

Major Customers

The top 5 major customers for the FYE Under Review are as follows:

According to the details, the top 5 customers are around 98%. The top 2 customers are over 80% of total revenue and the top 3 customers are Perodua-related companies. The company is involved in highly concentrated customer risk. If Perodua plans to decrease even 20% of the order, it will directly affect nearly 20% revenue of the company. Although the length of the relationship with Perodua is long, however, the risk is still too high to concentrate almost all revenue under 1 company.


Major Suppliers

The Group’s top 5 major suppliers for the Financial Years Under Review are as follows:

According to the details, the top 5 suppliers are around 53%. The company mentioned that due to the long working relationship with most of the major suppliers, there are alternative suppliers readily available, and as such, they are not materially dependent on any single major supplier.


Industry Overview

According to research from IMR Report, in Malaysia, the sales value of the manufacture of parts and components for motor vehicles has increased from RM30.0 billion in 2019 to RM32.3 billion in 2021 at a CAGR of 3.8%. The manufacture of automotive electronics is a subset of the manufacture of parts and components for motor vehicles.

PROVIDENCE projects that the sales value of the manufacture of parts and components for motor vehicles will grow from RM32.3 billion in 2021 to RM39.9 billion in 2025 at a CAGR of 5.4%, supported by the following demand drivers:

  • growth in the automotive industry;
  • the ability of automotive EMS industry players to offer R&D services;
  • technological revolution and advancements in automotive electronics;
  • increased outsourcing and relocation of electronics manufacturing activities to Southeast Asia; and
  • Government initiatives to support the automotive industry.

Collectively, these demand drivers are anticipated to bode well for the growth potential of the automotive EMS industry in Malaysia.

Automotive sales in Malaysia rose from 580,085 units in 2016 to 604,287 units in 2019 at a CAGR of 1.4%. This growth was underpinned by increased economic activity and trade flows. In 2020 and 2021, automotive sales were adversely affected by various restrictions imposed by the Government to curb the spread of COVID-19. As a result, automotive sales dropped to 529,434 units in 2020 and 508,911 units in 2021. National automotive marques, PROTON and PERODUA, collectively commanded 59.9% share of automotive sales in 2021.

The Malaysian Automotive Association forecasts that total sales of vehicles would reach 600,000 units in 2022 (comprising 540,000 passenger vehicles and 60,000 commercial vehicles). The sales tax exemption incentive for passenger vehicles extended until 30 June 2022 and the ramping up of production and deliveries by automotive companies to fulfill backlog and new orders will be among the main contributors to improving sales. Consumer spending is also expected to revive with Malaysia’s recovery. The introduction of new models including electric vehicles at more competitive prices, and promotional campaigns to push sales would also support sustaining buying interest.

The expectation of global and Malaysia’s economic recovery, the continuation of the sales tax exemption incentive for passenger vehicles under the National Economic Recovery Plan (“PENJANA”) package, and lower hire purchase loan interest rates would help to spur automotive sales. Under the PENJANA package, the Government announced a sales tax exemption of up to 100% for completely-knocked down (CKD) passenger vehicles and 50% for completely built-up (CBU) passenger vehicles. The sales tax exemption incentive for passenger vehicles under the PENJANA package which initially commenced for the period between 15 June 2020 to 31 December 2020 was subsequently extended to 30 June 2022. The introduction of new automotive models with the latest additional specifications, design styles, and competitive pricing would also assist in sustaining buying interest.

In April 2022, PERODUA announced an annual sales target of 247,000 vehicles for 2022, after achieving sales of only 190,291 vehicles in 2021. On a quarter-on-quarter comparison, PERODUA posted 61,624 vehicles registered in the first quarter of 2022, an increase of 6.4% from the 57,909 vehicles sold in the first quarter of 2021.

Source: IMR Report by PROVIDENCE


Business strategies and prospects for BETAMEK BERHAD

The Group’s business strategies and future plans are set out below:

1. The company intends to expand the product offerings through the following approaches:

    a. Continue to improve the existing products

    b. Identify products segments that have growth potential

2. The company intends to enhance and upgrade the manufacturing facility

    a. Expand R&D office space, raw material storage, and ancillary facilities.

    b. Automation of manufacturing process

    c. Purchase of machinery and equipment


MQ Trader View

Opportunities

  1. The company provides one-stop EMS solutions to automotive makers where they have the capabilities to carry out manufacturing services for PCBAs, subassemblies, box build, and system build of products. Through the highly integrated platform, they provide EMS solutions to automotive makers on a turnkey basis, whereby they are involved in almost every stage of the product development process up to the delivery of finished products.
  2. The management has a full plan to expand their business. For example, they continue to improve the existing products and identify product segments that have growth potential. Furthermore, they expand R&D office space, raw material storage, and ancillary facilities.

Risk

  1. Highly concentrated on customer risk. The company is significantly dependent on the PERODUA Group, which contributed to almost all of its revenue for FYE 2019 to 2022.
  2. Underperform on the financial statement. The company revenue does not grow stable, and the gross profit margin result is also worse than the previous result.
  3. The company may face a shortage of labour for the factory operation as they require semi-skilled operators for the operations.


Click here to refer the IPO - Betamek Berhad (Part 1)


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speakup

if u like Dr M, go ahead and apply

1 month ago

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