Foundpac expects strong growth
GEORGE TOWN: Foundpac Group Bhd expects its first-half performance for the financial year ending June 30, 2020 (FY20) to improve by a double-digit percentage over that of the same period a year ago, driven by the implementation of 5G infrastructure and transmission towers.
Group chief executive officer Ong Choon Heng told Starbiz that for the first half of FY20, more than Rm25mil worth of test sockets, stiffeners and laser stencils would be shipped to semiconductor test equipment customers in the United States, Europe and China, compared to about Rm21mil achieved in the corresponding period of the preceding year.
The test sockets and stiffeners are attached to semiconductor test equipments to check integrated circuits and printed circuit boards used in a wide range of 5G hardware, electronic home appliances, consumer electronics and semiconductor products.
“In 2019, the rollout of 5G in China, Europe and the United States generated the demand for integrated circuits used in the hardware of 5G transmission towers. These chips need to be tested, so the demand for semiconductor test equipment goes up,” Ong said.
“We expect the trend to continue in FY20,” he added.
According to Ong, the rollout of 5G technology is expected to hit US$2.7 trillion by the end of 2020.
“About Us$585bil of the spending is for the hardware to integrate the Internet of Things (IOT) hardware and Us$469bil for IOT services.
“At least US$1 trillion more would be to upgrade the infrastructure,” he said.
In FY19, Foundpac’s group growth was mainly driven by sales in Asia.
“The sales in Asia grew from Rm5.9mil to Rm10.6mil, up 78.6%.
“In the same period, sales in North America grew 22.59% to Rm13.7mil, while sales in Europe rose 24.2% to Rm10.7mil,” Ong said.
The test socket and stiffener business generates about 75% of group revenue, while the laser stencil segment generates the remaining 25%.
Foundpac’s subsidiary, Dynamic Stencil, makes and supplies laser stencils to electronic manufacturing services (EMS) companies that make higher-quality electronic boards or printed circuit board (PCB) with components.
“Our stencils enable the EMS companies to manufacture at a lower cost.
“Electronic boards are the centrepiece of every electronic device. They serve as the ‘brain’ that controls all the functions of the device,” Ong said.
On the impact of a weak ringgit on imported raw material cost, Ong said: “Although we pay more for imported raw material from Europe and Japan, our earnings in US dollar offset the higher cost of importation.
“We can also expect our top and bottom lines for FY20 to improve significantly due to a weak ringgit.”
Moving on, the group will continue to focus on a high-mix and low-volume product business model.
“Our strategy is to compete with the other test socket and stiffener manufacturers in terms of quality, so that we can price our products higher to generate better margins,” Ong said.
He said the group would continue to adopt a 30% dividend policy for FY20.
For the past three financial years, the group has been paying a one-sen dividend to its shareholders.
Foundpac’s net profit grew 57% to Rm11.8mil in FY19 from Rm7.5mil in the preceding year on a revenue of Rm44.9mil, up 26.5% from Rm35.5mil previously. Its earnings per share rose to 2.28 sen from 1.45 sen previously.