Engtek to allocate RM25m in operations

By David Tan in Penang

Stock Watch On ENG 

ENG Teknologi Holdings Bhd plans to allocate RM25mil for the group to expand its operations in the country and overseas next year compared with the RM22mil it had invested this year. 

Its group executive chairman and chief executive officer Datuk Alfred E.L. Teh told StarBiz that the allocation would be spent to upgrade the group’s machinery and equipment, acquire additional floor area and capacity, research and development and to recruit staff. 

Datuk Alfred E.L. Teh

“Our operations in China will receive 40% of the RM25mil investment. We are also considering the setting up of a second plant in China in addition to the current facility in Dongguan. 

“The remainder would go to our operations in Malaysia, Thailand, and the Philippines, with each of the sites receiving 20% of the allocation,” he added. 

According to Teh, the operation in China, involved principally in manufacturing actuators, is receiving the larger share of the allocation because of the higher growth demand. 

“The China operation is also a substantial contributor to the group's revenue and profitability. By the end of 2003, we expect the China operation to generate 30% of the group's revenue. 

“Next year, the contribution from China to the group's revenue is expected to increase to 40%,” he said. 

The group's RM22mil expansion budget for last year was invested in the purchase of new machinery, setting up a new line of production and expanding the production floor. 

“For the plant in Penang, we spent RM4mil in setting up a new line of production with new machinery to produce industrial products such as climate control devices for a US-based customer. 

“In Johor Bahru, RM4mil was invested to further increase its precision die casting capacity. 

The recently completed production line in Penang, which started commercial production in October, has the capacity to produce some 200,000 sets of climate control devises a month. 

“In China, we have injected RM8mil to expand capacity and our production floor in the Dongguan facility has increased to 105,000sq ft from the existing 50,000sq ft.  

“The expansion exercise in China should be completed by next February,” Teh said. 

“About RM4mil went into buying new machinery for the operation in the Philippines which produces spindle motor components, actuators, and base plates.  

According to Teh, the group expects to increase the volume of all its products next year. 

“The overall demand for the group's products has increased since the last 2 quarters and such trend is expected to continue into year 2004.  

Workers at Eng Technology plant in Penang.

“We are expecting overall product volume to increase between 30% and 50% year-on-year by 2004 due to our expanded capacities and better market share. 

“For example, the actuator production will increase from 22 million units in 2003 to 30 million in 2004.” 

Teh said over 90% of the group's yearly revenue were derived from the data storage manufacturing business segment, which included the production of actuators, base plates, spindle motor components, back-up tape drive components and voice coil magnet plates. 

Although the contribution from the industrial product business segment was still insignificant, the group expected it to generate at least 30% of the group’s revenue in 2005.  

According to Teh, Eng Teknologi is currently one of the leading five manufacturers of precision components in the global data storage industry. 

“The current global demand for data storage devices is around 300 million units per year and the group’s market share is between 8% and 10%.  

The group is well positioned to widen its market share to 15%, by year 2005” he said. 

As for the management policy of the company, Teh said the group would tackle problems and projects one at a time to help us achieve our goals and stay resilient. 

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