JHM set to soar in the lighting sector

GEORGE TOWN: JHM Consolidation Bhd plans for its new aerospace business segment to be a major contributor to the group’s revenue by the second half of 2017, riding on a projected compounded annual growth rate (CAGR) of 5.08% for the aircraft lighting industry.

Group deputy managing director Khor Thean Lee told StarBiz the group aimed to produce light-emitting diode (LED) systems for aircraft cabins and precision aircraft parts, leveraging on its vast experience in assembling automotive LED modules and making precision telecommunication and consumer electronic components.

“We expect to obtain the AS9100 certification in July, which would qualify us as an international aerospace component manufacturer, placing the group in a stronger position to win contracts from a US aerospace customer to supply LED systems.

“We are excited by the opportunities in the aerospace sector as aerospace business deals usually cover a 30-year period.

“We will spend RM10mil in 2017 to upgrade our seven plants in Sungai Petani to make precision aircraft parts,” Khor said.

Currently, JHM’s automotive LED rear lamp business contributes 80% to its revenue, while the precision telecommunication and consumer electronic component segment the remaining 20%.

According to a recent MarketsandMarkets report, the aircraft lighting market is projected to grow from US$1.99bil in 2016 to US$2.55bil in 2021, growing at a CAGR of 5.08%.

The report identify growth in aircraft deliveries, demand for low cost carriers and efficient alternatives for the existing installed lights as the main drivers of growth in the aircraft lighting segment.

Asia Pacific has the highest growth potential for the aircraft lighting market, driven primarily by the increase in demand for low cost carriers and domestic civil aviation from small airline companies, according to the report.

On its automotive LED segment, Khor said the group still had orders with an estimated market value of over RM90mil to deliver for the second half of 2016, which is about 20% more than what was delivered in the same period a year ago.

“We delivered automotive LED products with a market value close to RM90mil in the first half of 2016.

“Moving ahead, we plan to expand our automotive LED business into Europe and Japan soon.

“Currently our markets are in US and Canada,” Khor said.

According to Khor, about 45% of the group’s sales in 2016 is in US.

“With the entry of new customers, orders are predominantly denominated in US dollars, providing a natural hedge against foreign exchange fluctuations.

“About 60% of the raw material cost is also in US dollar.

“It is estimated that every 1% strengthening in the US dollar against the ringgit will potentially impact JHM’s bottomline by 1%-2%,” he said.

According to Khor, JHM has three major customers whose main markets are in US and Canada for 2016, contributing about 80% of the group’s revenue, compared to two major customers in 2015.

Khor said JHM’s participation in the aerospace sector should broaden the group’s customer base.

“With the contribution of the aerospace segment, the dependency on the automotive LED business would be reduced.

The contribution from automotive LED business would be gradually brought down to 50% in three years, compared to 80% currently,” he added.

“We need to show a RM20mil net profit in three to five years. With a strong growth forecast for the automotive industry, we are targeting to go to the Main Market by 2018,” he added.

For the first quarter ended March 31 2016, the group posted RM3mil in net profit on the back of a RM45mil turnover, compared to RM1.57mil and RM25mil achieved in the previous year’s corresponding period.