Opcom faces pressure on margins
> Fibre optic cable maker aims to maintain bottom line as raw material costs climb
SHAH ALAM: Fibre optic cable manufacturer Opcom Holdings Bhd, which has seen a good run in its share price thanks to its affiliations with the new government, hopes to maintain its bottom line on the back of a challenging business outlook as it looks to improve efficiency.
Opcom’s share price, which has gained 33.89% over the last one year, closed half a sen lower to 76 sen yesterday with some 3.5 million units traded.
Opcom saw its raw material costs increase by 20% with the weakened ringgit, signalling pressure on margins in the next round of contracts. The company imports 60-70% of its raw materials, which are billed in US dollars,
The group’s chairman and CEO Tan Sri Mokhzani Mahathir said the pressure the government has on telco players to improve their services and offerings at lower prices, will translate onto the company as a part of the supply chain.
He said while this may put pressure on the pricing of its products and services, the group will see how best it can improve its business volume and improve economies of scale to allow clients to price their products competitively.
On investments, Mokhzani said Opcom is not looking for anything big, only those that are relevant.
“The market is volatile right now, we will see who creates opportunities for us to invest in. When we invested in thixotropic gels we saw that they are a niche market product and can benefit from the market footprint,” he said.
Opcom acquired a 40% stake in Unigel (UK) Ltd, a supplier of thixotropic gel, a critical component in the production of Opcom’s fibre optic cables, in 2014.
Opcom, which is currently focused on its existing clients, has a tender book and an order book of slightly over RM100 million.
Having invested RM1.7 million in equipment capital last year, Opcom will be looking at spending about 2-3% of its revenue as capital expenditure (capex) in the current financial year, depending on the exchange rate, among others. Its average capex spend is 2-5% of its revenue.
In the first quarter ended June 30, the group’s net profit rose 20.54% to RM833,000 from RM691,000. Revenue grew to RM17.85 million from RM22.45 million.