Globaltec expects to return to profit in FY16

by **Cals** Thu 17 Dec 2015, 00:31

Globaltec expects to return to profit in FY16

By Sulhi Azman / The Edge Financial Daily | December 16, 2015 : 10:03 AM MYT
This article first appeared in The Edge Financial Daily, on December 16, 2015.
[size=12][You must be registered and logged in to see this image.]Goh: We are aggressively rationalising our fixed and variable costs in our manufacturing business.
KUALA LUMPUR: Globaltec Formation Bhd ([You must be registered and logged in to see this image.] Valuation: 0.90, Fundamental: 0.95), which has been loss- making since June 30, 2013 (FY13), expects to return to profitability in FY16 as it streamlines its integrated semiconductor and automotive manufacturing operations, said its group executive chairman Datuk Seri Goh Tian Chuan.
“We are aggressively rationalising our fixed and variable costs in our manufacturing business, as well as improving the efficiency of our plant through automation. Hopefully, with all these initiatives in place, we can make some profit by FY16 and keep our shareholders happy with dividends,” Goh, 54, told reporters after the group’s fourth annual general meeting here yesterday.
Globaltec, a result of a three-way merger among AutoV Corp Bhd,AIC Corp Bhd and Jotech Holdings Bhd, has not declared any dividend since its formation in FY12.
The group recorded a net profit of RM1.1 million in the first quarter of financial year 2016 ended Sept 30, 2015 (1QFY16), compared to a net loss of RM1.07 million a year ago, due mainly to better margins earned and favourable foreign-exchange rates. Revenue, however, fell 19.7% to RM60.79 million from RM75.68 million in 1QFY15, due to a drop in revenue from all its integrated manufacturing services divisions, with the automotive division registering the steepest decline of RM13.9 million.
“The 1QFY16 results are a positive indication [of the group’s prospects], but certainly not a guarantee. We still have a lot of work that needs to be done as we move towards profitability,” said its executive director and group finance director Chen Heng Mun.
“That aside, it is important to note that we are in a net cash position, and our cash flow is positive, which is very important to sustain our business,” Chen added.
As at Sept 30, 2015, Globaltec’s borrowings stood at RM45.79 million, while cash and cash equivalents amounted to RM58.48 million, leaving it with a net cash of RM12.69 million.
On its upstream oil and gas business, Goh expects Globaltec’s 55%-owned subsidiary NuEnergy Gas Ltd — which is listed on the Australian Stock Exchange — to begin drilling its onshore gas assets via unconventional method by as early as 2018.
“Our production cost is lower than our peers. If say, the cost to drill a well hovers between US$10 million (RM43.1 million) and US$20 million, then we can do it at 10% of that,” he said, adding that Globaltec is in the midst of raising some A$10 million (RM31.1 million) via a non-renounceable rights issue to fund a drilling programme to improve its reserve levels.
Currently, Globaltec operates six production-sharing contracts in Indonesia, of which five coal bed methane fields are in Sumatra and the remaining field is in Kalimantan, with a total area of 5,500 sq km.
Goh also said Globaltec may dispose of its non-core business, particularly the low-yielding and non-performing assets within its manufacturing portfolio, as it shifts its focus to high-margin products.
Without specifying any timeline, Goh said Globaltec may also dispose of its plantation segment, given the weak crude palm oil price outlook that is generating “unsteady and unpredictable income”.
[/size]