LNG Resources allocates RM50mil for M&A plan

Group in talks with three parts manufacturers for aerospace sector

GEORGE TOWN: High-precision engineering group LNG Resources Bhd is allocating RM50mil for a merger and acquisition (M&A) exercise this year to expand its presence in the aerospace industry.

Group managing director Jackie Yong Chan Cheah told StarBiz that the group is now in discussions with three companies involved in the manufacturing of parts and components for the aerospace sector.

“We hope to acquire a major stake in one of these three companies. They are all small and medium enterprise companies.

“Two are in the the United States while the other is a local company. The two US-based companies have a revenue of US$15mil to US$20mil per annum,” Yong said.

Of the RM50mil allocation, about RM30mil will be used for the M&A deal, while the other RM20mil as working capital for the acquisition.

Yong said if the negotiation with one the companies is successful, the M&A exercise could be completed in two to three years.

“We are targeting for the aerospace sector to generate about 40% of the group’s revenue in three years, when the revenue of the group grows to RM200mil,” he added.

LNG Resources currently makes connectors for the aerospace indus- try, which generates about 16% of the group’s revenue.

The group also makes connectors for the automotive, medical devices, oil and gas equipment, and power management sectors.

“We are developing prototypes of power and signal connectors for a US manufacturer of self-driving cars.

“We expect to start mass production of such connectors by 2020 for the US customer, which has offices in California and North Carolina.

“These are high-value connectors which are expected to generate about 15% of our revenue in 2020,” Yong said.

He added that to service the customer, the group had invested US$500,000 in two sales and design offices in the US.

Currently, connector business contributes about 60% of the group’s revenue, while the other 40% is generated by the electronic sensor and switch segment.

“About 90% of the group’s revenue comes from export sales,” he said.

LNG Resources currently has manufacturing facilities in Bukit Minyak, Penang, Johor, Vietnam and India.

Presently headquartered in Muar, Johor, LNG is looking at shifting its head office to Penang.

“It is easier to recruit talents in Penang, where there is also an established electronic and electrical eco-system to support the manufacturing sector,” Yong added.