TOOL and diemaker Jotech Holdings Bhd (Jotech) has cast its net to tap opportunities in China.
Its wholly-owned subsidiary Jotech Metal Fabrication Industries Sdn Bhd had entered into a 30-year joint venture with two foreign companies to produce precision tools, die and metal stamping parts in Guangdong, China.
The non-binding memorandum of understanding will see Jotech Metal holding 60 per cent in a US$4 million paid-up joint-venture company, while China-based Jiang Men City Jolimark Information Technology Ltd 5 per cent and Singapore-based Dinomax Pte Ltd 35 per cent.
The joint venture is expected to broaden Jotech group's product and customer base while tapping the huge potential market for its products in China in line with its strategy to expand regionally. Products manufactured by the joint venture company will be for both China's domestic market and overseas markets.
The estimated total cost of the joint venture company is US$8 million. The joint venture company will source for external borrowings of US$4 million when required to meet the funding requirement.
The joint venture project is to be undertaken on a fast track basis, the group reckons the expected completion of the facility will be towards the end of this year's second quarter. Commercial production will thus commence soon after and should contribute positively to the group's future earnings after the initial ramping up period.
The Kuala Lumpur Stock Exchange second board-listed associate company of chipmaker AIC Corp Bhd manufactures and fabricates high precision tooling, die sets, and stamped metal components for electrical, consumer electronics, and automotive industries.
In addition, it manufactures semiconductor moulds and parts, high precision jigs and fixtures as well as designs and fabricates automatic handling equipment for electronic and semi-conductor industries.
In the past, the group had admitted to not paying much attention to increasing its overseas market share as it claimed that local demand had been strong enough to keep it busy.
But with capacity utilisation now having fallen owing to lower demand from multinationals located in Malaysia, Jotech has been jolted awake and now sees the prudence of widening its reach.
Metal stamping and precision, and the semiconductor tooling business are said to each contribute 50 per cent to Jotech's pre-tax profit, although the latter only accounts for about 30 per cent of group turnover.
The chip sector has witnessed several starts and stops over the past few years. While pundits were initially expecting to see some positive growth in 2002's fourth quarter owing to the traditionally longer Christmas order list, alas even this hope has been dashed.
Not surprisingly, sentiment on the sector remains obscure especially now that a US-Iraq military stand off is imminent and the global economy is gripped with uncertainties.
Observers brave enough to hazard a guess in light of these uncertainties now say that recovery for the tech sector is likely to take place in the second half of this year, citing outsourcing activities by technological companies and higher regional consumer demand for semiconductor products as plausible reasons for their optimism. Those more pessimistic, however, are expecting the year to hold no major surprises. The argument here is that companies will have to muster enough confidence to start spending again in a big way in order to breathe life back into the tech sector. For now at least, this seems unlikely.
For the nine months ended Sept 30, 2002, Jotech reported a lower net profit of RM2.75 million, compared with RM4.1 million in the last comparable period. Turnover for the review period was also lower at RM65.91 million, against RM70.1 million previously.
The counter hit a year's high of RM1.90 on April 15 last year only to retrace and test a 52-week low of RM1.05 in October. Jotech finished off at RM1.15 on Wednesday.