PETALING JAYA: HPMT Holdings Bhd believes that the worst is over for the manufacturer and distributor of cutting tools, (pic) and this year will be a year of recovery.
Executive director and chief financial officer Tan Kim Chuan said the company’s optimism stemmed from the easing of movement restrictions imposed as a result of the Covid-19 pandemic, supported by the various economic stimulus packages here and globally.
“We look at our orderbook for January and February, and it is encouraging, we feel that the momentum for market recovery is there, ” Tan told StarBiz.
HPMT, controlled by founder and executive chairman Ku He @ Khoo Yee Her and his family, is involved in the manufacturing and distribution of cutting tools which are needed for engineering purposes within many industries such as automotive, aerospace, construction and electronics.
It is also involved in the trading of various other brands of cutting tools and accessories as well as offers surface coating services for cutting tools, moulds, dies and component parts.
Based on its latest financial results, up to 89% of the company’s revenue comes from its manufacturing division with 8% from trading, and 3% from its coating division.
HPMT reported a dip in its financial results for its latest quarter, announcing a net profit of RM2.2mil compared to a net profit of RM2.6mil for the same period, a year earlier.
Revenue stood at RM18.6mil versus an earlier RM19.4mil.
Its top five revenue contributors by country are Malaysia, Italy, Germany, China and Japan.
Tan said the company’s current orderbook stood at about RM5mil or around a month’s worth of orders.
“This is consistent with the industry, in this business, customers will easily switch to other companies if you cannot deliver for them on time, ” he added.
According to him, HPMT has no local competitors as the largest ones are all global names, with the biggest being a Swedish company, Sandvik AB, which controls about 25% of the global market which in turn, is estimated to be worth over US$20bil.
He gives no data on how big a market share HPMT has, only stating that it is “relatively small.”
Still, according to Tan, the company is able to price its products at a premium, given the quality of its products.
Interestingly, its gross profit margin has been on an uptrend, coming in at 37.3% in Q120,39.9% in Q220 and increasing to 46.2% in Q320.
The company is scheduled to release its fourth quarter results today.
HPMT made its debut on Bursa Malaysia’s Main Market in June 2019, raising over RM42mil via the IPO exercise.
The company’s stock however has been languishing below its IPO price of 56 sen ever since.
At last look, it was 50 sen per share, valuing the entire company at some RM164mil.
In a note to clients recently, Hong Leong Investment Bank, which was also HPMT’s principal adviser, underwriter and placement agent for its IPO exercise, said it was raising its earnings target for HPMT by over 7% for FY2021, on anticipation of more orders.
It also raised its target price for the company’s stock to 46 sen from an earlier 39 sen.
Tan said the company, which is in a net cash position had no plans at the moment for any merger and acquisition exercise and would focus on organic growth.
“However, if there is an opportunity, we will consider it.”