PETALING JAYA: TT Vision Holdings Bhd
(TTVHB) is optimistic about leveraging on growing demand from both the optoelectronics and solar cell segments within the semiconductor industry.
TTVHB chief executive officer and executive director Goon Koon Yin told StarBiz that he remains cautiously optimistic on the business outlook.
“Global headwinds will only have short-term effects. The semiconductor manufacturing equipment industry will be boosted by the long-term prospects of the above-mentioned industries.
“We have been in the industry for 21 years and been through multiple economic downturns,” he said.
Based in Penang, the group was set up in 2001, and is en route to be listed on the ACE Market on Jan 18.
TTVHB is a developer and manufacturer of machine vision equipment in relation to the inspection of optoelectronics, solar cells, discrete components and integrated circuits (ICs) as well as being used in vision guided robotic equipment.
It is worth noting that TTVHB’s initial public offering (IPO) received an overall oversubscription rate of 89.15 times.
The group had raised RM28.7mil through a public issue of 84.5 million new shares at 34 sen per share.
This translates to a price-earnings (PE) multiple of 19.1 times, based on the group’s earnings per share (EPS) of 1.78 sen for the financial year ended Dec 31, 2021 (FY21) and enlarged share capital of 468 million shares upon listing.
Goon sees huge growth potential in both local and global machine vision equipment markets.
“We intend to expand our coverage to more foreign markets. We target to participate in up to seven exhibitions and conferences each year, especially in China, Taiwan, Malaysia, Germany and the United States,” he said.
The group serves two key markets, namely, Malaysia and China.
The domestic market accounted for 81.3% or RM38.4mil of group revenue in 2021, while China, its largest export market, contributed nearly 16% or RM7.5mil.
In the first half of 2022, revenue contribution from China jumped to 73.45% or RM20.1mil. Goon said this was mainly due to the group’s China-based customers’ increase in orders for discrete component and IC inspection equipment.
“The timing of fulfilment of orders was such that most of the sales from China were recorded in the first half,” he explains.
Going forward, he expects contribution from China to increase with the reopening of borders.
“However, as different sectors and market segments have different capital expenditure (capex) cycle and needs, the overall percentage of revenue contributions from China compared to other countries, including Malaysia, is expected to be more even once orders from other business segments and sectors increase, such as optoelectronic and solar,” said Goon.
Meanwhile, about 28% of the IPO proceeds will be allocated for research and development (R&D) expenditure.
Goon said the group will strengthen its R&D capabilities to focus on new product development and upgrading of existing equipment, in order to provide higher value solutions to customers.
The group also aims to increase its headcount over the next 24 months by hiring at least 29 engineers and technical personnel in various disciplines.
“Such recruitment will be mainly in the areas of R&D, production, engineering and sales to support our revenue growth,” he said.
He added that the industries that TTVHB served required continuous innovations and upkeep with the latest technologies.
“Approvals of our utility innovations patents showcase our R&D capabilities,” he said.
On the rise in raw material costs, Goon said the group typically placed orders in bulk and based on an agreed procurement price with customers, it is able to pass any significant fluctuation in cost to its customers.
For the first half of 2022, TTVHB’s top five major suppliers which are based in Malaysia, Singapore and Hong Kong accounted for 47% of purchases.
“Our long-standing business relationships with our major suppliers give us priority and advantage in procuring materials and services,” Goon explained.
Regarding the rise in the minimum wage, he pointed out that the group was not affected as all employees’ wages were above the minimum level.
“Most TTVHB employees (almost 80%) are engineers and technical personnel. We provide competitive remuneration packages to attract and retain talent,” he said.
Meanwhile, as at end-June 2022, TTVHB’s gearing ratio remained low at 0.15 times. Post listing, the gearing ratio will drop to 0.03 times with nearly 21% of the IPO proceeds used to repay bank borrowings.
“Therefore, TTVHB is not expected to be materially impacted by the rising interest rate environment,” he said.
Goon is also confident the group’s profit margins will remain in the double-digit level in 2023, due to its strong technical capabilities and optimisation of resources.
He pointed out that TTVHB had strong business relationships with major customers that were market leaders in their respective industries.
“Customers such as Hanwha Q Cells Malaysia and Maxeon Solar Technologies have been sourcing from TTVHB for at least five to nine years, and Dominant Opto Technologies for more than two years,” said Goon.
Also, a key strength of the group lies in its experienced management team and technical personnel.
Goon and Wong Yih Hsow, who is TTVHB chief operating officer and executive director, have 28 years of technical and operational experience in the industry, while executive director Jennie Tan Yen-Li has 26 years of experience in human resource and administration, in addition to other key senior management executives with 15 to 28 years of experience.
Meanwhile, Mercury Securities Research has a target price of 62 sen on TTVHB’s stock, based on the FY23 estimated EPS of 2.7 sen and a PE of 23.1 times.
In an IPO note, the research unit said it liked the group for its solid track record and strong R&D capabilities.
Mercury Securities Research said the company’s R&D efforts resulted in the approval of two utility innovation patents, which are valid up to 2031.
The research unit added that TTVHB achieved a three-year revenue compound annual growth rate or CAGR of 51.25% from FY19 to FY21, despite the Covid-19 pandemic in 2020.
