The Star Malaysia - StarBiz
Betamek aims to ride on high demand for electronics in EVS
BETAMEK Bhd aims at leveraging on new technologies as the automotive industry moves towards hybrid and electric vehicles (EVS).
Managing director Mirzan Mahathir tells Starbizweek that such green vehicles would see increased demand for electronics and Betamek is preparing for this transition in the automotive industry.
“As hybrid, electric and autonomous vehicles gain global market share, Betamek is in a unique position to leverage this growing market trend and expand and diversify our product offerings with competitive solutions,” he says.
“This is the general trend for the automotive industry. As we move towards hybrid and EVS, the amount of electronics within each car increases a lot more.
“The move towards EVS will come faster than we expect. Advances in technology are supporting this. So we are looking to invest in this area, and are focused on strengthening our research and development (R&D) in this direction,” explains Mirzan.
The electronics manufacturing services provider specialises in design and development, procurement and manufacturing of customised electronics and components for the automotive industry.
The group is involved in the D&D and manufacture of vehicle audio products and components comprising vehicle infotainment systems and audio video accessories as well as vehicle accessories such as air conditioning control panels, USB chargers, mirror switches, power sockets, reverse cameras and other car accessories.
“We consider that there are still many untapped opportunities for product segments in relation to advanced driver assistance systems, entertainment and connectivity, Internet of Things and accessories of vehicles,” he says.
Mirzan points out that the modern vehicle infotainment system is an evolution of the vehicle-stereo, which combines elements of audio and video, IOT, GPS and navigation capabilities, communications, safety and security as well as other accessories with vehicle control’s console.
“These systems will be pre-installed and are able to integrate with the rest of the vehicle and future technologies such as hybrid, electric and autonomous vehicles,” he says.
Mirzan notes that as at end-august, 2022, Betamek was still at the early stages of undertaking joint R&D activities with its technology partners.
Meanwhile, the group has commercialised some of these technologies as features in Perusahaan Otomobil Kedua Sdn Bhd’s (Perodua) latest vehicle models.
“We will continue to identify new technologies that we consider to have significant growth potential and introduce these as features in our products offering, particularly those which may have synergistic potential with our existing key product categories,” he says.
Regarding the global shortage of automotive components and chips, Mirzan says the group has been accumulating inventory in order not to disrupt supplies to its customers.
“We have an excellent procurement team and they have been on top of this (issue). We are always looking to buy from various sources – China has been a major supplier,” he says.
Mirzan explains that the group has to make judgement calls on the quantities to buy and inventory holding costs.
“We bought forward significantly, and of course, it has affected our inventory holding costs. But if we don’t do that, then we will have major issues with customers.
“Our challenge is whether we can buy sufficient quantities because in the automotive sector, we are working on a just-in-time basis,” he says.
According to Betamek’s prospectus, imports consist of 68% to 75% of input materials’ purchases for Betamek’s previous four financial years ending March 31 (FY19 to FY22).
Chips consist of the largest portion of input
materials’ purchases, at 40% to 51% for FY19 to FY22.
“Although the group has historically been able to pass on the increase in cost, we may not be able to mitigate the full extent of the price increase,” says Betamek.
As for the issue of passing costs onto customers, Mirzan says Betamek’s major customer Perodua has been “very considerate.”
“You have to look at it from the whole ecosystem. Perodua has a philosophy where it makes sure that all its vendors are able to supply all the components it need.
“Rising input costs has an impact on us, and we will obviously present this to our customers. They have been very considerate, and we can appeal for adjustments. So that helps us.”
On the impact of the rising interest-rate environment and inflation, Mirzan says the group is concerned as consumer demand can be affected. However, he points out that Betamek is also in a good position due to Perodua’s strong sales.
“We are in a somewhat good position partly because Perodua is a very established manufacturer – well regarded by consumers and each of their models have been very popular.
“We hope that the impact (on consumer demand) will be much later, if any, because Perodua is trying very hard to fulfil their orders,” he says.
Betamek’s competitive strengths include a 28-year relationship with Perodua since it was first appointed to supply vehicle audio systems for Perodua Kancil cars. It is worth noting that around 99% of Betamek’s revenue for FY19 to FY22 was derived from the Perodua group and its approved suppliers.
Since FY20, around 1% of revenue came from supplying USB chargers for Proton models (Saga, Iriz and Persona).
Betamek says its supply deal with Perodua is non-exclusive and it can also supply to other automakers. “We intend to supply our vehicle audio products, components and accessories to other automakers, and have been actively participating in tenders.”
Betamek, en route for an ACE Market listing on Oct 26, 2022, aims to raise Rm33.8mil from the initial public offering (IPO) where the group will issue 67.5 million new shares,
representing 15% of the enlarged share capital, at 50 sen per share.
Based on the enlarged share capital of 450 million shares, Betamek is expected to have a market capitalisation of Rm225mil.
Also, Iskandar Holdings Sdn Bhd, owned by Mirzan, the major shareholder of Betamek, will offer 45 million existing shares to selected investors via private placement.
Post-listing, Mirzan will have a 72% stake in Betamek, with another 3% owned by senior management shareholders.
Based on the IPO prospectus, the offer price has a price-earnings multiple of 16.7 times based on Betamek’s earnings per share of 2.99 sen for FY22. It also takes into consideration Betamek’s pro forma net assets per share of 28 sen, as at end-fy22, after the IPO and utilisation of proceeds.
From the IPO proceeds, Betamek plans to use Rm7mil (20.7%) to fund R&D activities for new product development and Rm6.5mil (19.3%) to expand its R&D office space, raw material storage and ancillary facilities to cater for its future growth.
Another Rm3mil (8.9%) will be used to acquire machinery and equipment for its existing factory in Rawang to enhance its manufacturing efficiency and capabilities.
The balance will be used to repay bank borrowings of Rm10mil (29.6%), while Rm3.9mil (11.4%) is for general working capital and the remaining Rm3.4mil (10.1%) to defray listing expenses.
For FY19 to FY22, around 80% of revenue was from designing and manufacturing vehicle audio and visual products, with the balance from designing and manufacturing vehicle accessories.
For FY22, net profit jumped 10.35% to Rm13.47mil, while revenue grew 2.45% to Rm133.05mil due to an increase in revenue from vehicle audio and visual products.
On the group’s dividend policy, Mirzan says the board does not have one presently.
“This is an industry that requires a lot of investment. We have to be prudent about that and try to ensure that we are on top of the technology and be competitive, going forward.
“At the same time, we recognise that shareholders need to have dividends, having invested in the company. So we want to strike a balance,” he explains.
The IPO is open for subscription until Oct 7, 2022.