Techfast bullish on all three business segments
Us-china trade spat a boon
DESPITE reporting a slower growth in the first half of financial year ending Dec 31, 2019 (FY19), Techfast Holdings Bhd owner and CEO Jason Yap Yoon Sing remains confident about the company’s prospects for 2020.
For one, Techfast’s mainstay business of self-clinching fasteners could see a jump in demand, arising from the Us-china trade spat.
Secondly, the group’s business that makes rubber sheets to clean semiconductor manufacturing equipment is also poised to grow due to surging demand from China and Taiwan.
Meanwhile, its third segment of manufacturing epoxy materials for the lighting industry, specifically the LED sector, could see a rise in demand from those markets.
“We are expecting at least a 50% topline growth. We see good prospects across all three segments next year, particularly from the expansion of our China and Taiwan markets.
“Of the three businesses, the rubber sheet cleaners for the semiconductor industry is our growing cash cow,” he tells Starbizweek.
After all, the rubber sheet cleaner segment is Techfast’s largest revenue contributor, making up 60% of total group revenue in the first half of FY19.
Techfast’s competitive edge is that the rubber sheet cleaner and epoxy business segments are niche, given the special formulation of these products.
As such, Techfast has carved out a substantial market share in Malaysia and Southeast Asia for itself as a leading provider of these two materials.
The rubber sheet cleaners are used to clean moulds used in the production of semiconductors, while the epoxy material is used in the formation of LED or display encasings.
On the other hand, the self-clinching fasteners are commonly used in the electronics, telecommunications, computer peripheral and automotive industries.
For the first half of FY19, Techfast posted a net profit of Rm1.28mil, which represented a 37% year-on-year decline.
This was on the back of lower sales volume, resulting in a 12.2% y-o-y drop in revenue to Rm13.52mil during the period.
This was mainly attributed to lower sales of self-clinching fasteners.
According to Bursa Malaysia filings, Techfast had experienced a delay in receiving raw materials for a US project earlier this year, but the production for the project is now in full swing.
As for the rubber sheets and epoxy segment, sales were lower domestically and in South-east Asia, while sales to China and Taiwan saw an improvement over the halfyear compared to the same period last year.
Yap explains that the fastener segment is expected to see an influx of sales from American and European companies, who are shifting the purchase of fasteners away from the China market.
“There is also the transfer of manufacturing or assembly businesses from China to Malaysian firms, which will also contribute to a growth in local orders for fasteners,” he says.
Meanwhile, the rubber sheet cleaner business segment will ride on the robust growth of the global semiconductor demand.
Simply put, as more semiconductors are produced, there will be growing demand for rubber sheet cleaners to clean the moulds.
Techfast is also taking initiatives such as second sourcing to lower its material cost and enhancing machinery capability with new technology.
Apart from that, an example for growing LED demand is stemming from the greater adoption of LED billboards.
Currently, Techfast has a production capacity utilisation rate of 70%, 50% and 20% across its fastener, rubber sheet and epoxy segments, respectively. Hence, the group has the capacity to accommodate an influx of orders, going forward.
Yap is also eyeing potential acquisitions to expand Techfast’s production capacities, should the need arise in the near term.
Yap holds a 16.5% stake in Techfast, while executive chairman Michael Lim Tock Ooi has 13.7% in the group.
Techfast is in a comfortable financial position to launch acquisitions, given its cash in hand amounting to Rm10.1mil, which include short-term investments and fixed deposits.
The group does not have any borrowings, save for finance lease liabilities.
Techfast shares have risen by some 37% in the last three weeks.
It had a price earnings multiple of 27.46 times, and a market capitalisation of Rm88.7mil as of yesterday’s close.
The group has a dividend policy in place, targeting a payout ratio of 40% of its audited consolidated net profit for each financial year.