Unimech leverages on Indonesian market for growth ahead

KUCHING: Unimech Group Bhd ( Unimech) is banking on the Indonesian market to further grow its distribution of engineering equipment business.

The research arm of TA Securities Holdings Bhd ( TA Research) in a report said the listing of the company’s Indonesian subsidiary PT Arita Prima Indonesia Tbk on the Indonesian Stock Exchange last year has further enabled the company to expand its customer base.

TA Research analyst Angeline Chin said, “We view the listing of its Indonesian subsidiary, PT Arita Prima Indonesia Tbk as a launch pad to expand its customer base to large and establish corporations.

“According to management, the outlook for the oil & gas and palm oil industry in Indonesia are very promising and will be the growth catalysts ahead.

“The development of new liquefied natural gas ( LNG) plants and the growth in crude palm oil ( CPO), biodiesel, and oleochemicals processing industries argurs well for the group as the demand for valve products will increase,” she said in a report.

She observed that Unimech generated a significant percentage of its sales from overseas market with Indonesia, the largest overseas revenue contributor with approximately RM54.8 million or 24 per cent and is on a steady uptrend.

She noted that the group plans to build new plants and more supporting facilites in Indonesia as part of its business expansion plan.

Additionally, she said the demand for industry equipment is expected to rise and become healthier in 2015 after the country’s general election this year.

Chin said the potential rise in demand will serve as a catalyst for Unimech to generate more sales in the future.

Meanwhile, Chin observed that Unimech’s business model and profit have remained resilient over the years.

She said the company’s revenue and profit has achieved fouryear compound annual growth rate (CAGR) of 18 per cent and 13 per cent in financial year 2009 to financial year 2013.

Furthermore, she said the group’s operating margin has remained steady at 16 per cent from financial year ( FY) 2009 to financial year 2013 while its gross margin has also expanded over the years from 37.8 per cent in FY09 to 41.3 per cent in FY13.

“In addition, we believe better pricing power on their own inhouse branded products has enabled the group to command higher gross margin compared with third- party branded products.

“On the other hand, Unimech plans to increase its presence in the oil and gas and marine ship building sectors. It is also looking to penetrate into water works and waste water market.

“The group will lengthen its product line by offering more products for the entire chain of heat equipment and piping systems, such as control and automated valves.

“It will also focus on developing range of pumps for wide-ranging industries and markets,” she noted.

Therefore, TA Research believed that the company’s financial performance could be steadily climbing and remains upbeat about the company’s outlook.

It estimated that the company’s turnover and earnings could be posting double- digit growth of between 10 per cent to 12 per cent in FY14 and FY15.