KUALA LUMPUR: EG Industries Bhd
(EG) is one of the world’s leading electronic manufacturing services and vertical integration provider for world-renowned brand names of electrical and electronic products for several industries including consumer electronics, ICT, medical, automotive and telecommunications.
CIMB Equities Research said on Tuesday EG has two primary business activities, namely printed circuit board assembly (PCBA) and box build, which entails high and low-mix printed circuit board and backplane assembly to total design, manufacturing, testing and shipping of completed product to customers’ end users.
Currently, it has three manufacturing plants in Kedah, Malaysia and Prachinburi, Thailand. The closest peers listed on Bursa are SKP Resources and VS Industries.
In FY17, EG’s total revenue was made up of 28% local market vs. 72% export markets (Thailand 39%; Singapore 14%; Europe 0.7% and others 17%).
EG recorded a strong three-year (FYE15-17) sales and profit after tax & minority interest (PATAMI) compound annual growth rate (CAGR) of 12.9% and 122.1% respectively.
The research house said for FY17, EG registered 41.6% and 30.6% year-on-year higher in its total sales and PATAMI respectively.
This strong growth was on the back of sales expansion in both PCBA and box build segments and lower deferred tax expenses incurred in FY17 as EG benefitted from reinvestment allowance on qualified capital expenditure and export allowances.
CIMB Research ssaid EG is in the midst of constructing its International Procurement Hub (IPC) in Sungai Petani, Kedah.
With IPC, EG is expected to obtain more competitive raw material prices through larger scale of procurement activities. In turn, cheaper raw materials are likely to sustain EG’s global competitiveness in the electronic manufacturing services market.
EG’s growth strategies include: (1) To bid for more box build contracts, especially for consumer electronics products; (2) To incorporate box-build capabilities in Thailand’s manufacturing facility; and (3) To add a third business segment, which is distribution in FY18. • EG’s borrowings are mainly denominated in US$ and Thai Baht (THB).
Hence, the appreciation of the US$ and THB will have an adverse impact on the company.
The proposed listing of its unit SMT Industries Co. on the Market for Alternative Investment of the Stock Exchange of Thailand is still in progress.
Top five major shareholders have recently raised their stakes, according to Bloomberg.
EG is trading at six times 12-month trailing price-to-earnings(P/E) against its sector peers (SKP Resources and VS Industry) P/E of 20.9 times.
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