Steely growth for Tashin

New source of growth: Tashin will be expanding into the production of wire mesh with the acquisition of new production lines.

ESTABLISHED 20 years ago as a steel processing company, Tashin Holdings Bhd has come a long way while maintaining its profitability despite the economic challenges of the 21st century.

“The success of the company has to do with our sales and marketing team’s ability to penetrate into those markets that consume steel products despite the economic downturn of the early 21st century, a consequence of the Asian Financial Crisis.

“There were still industrial and construction businesses that carried out projects then although the times were tough,” says managing director Lim Choon Teik.

Tashin produces cold rolling steel bars, slit coils, steel sheets and expanded metal for the automotive, electrical appliances, steel fabrication, construction and furniture industries.

“We sell a lot of our products to stockists and wholesalers who then sell them to the end users in the construction industry,” he adds.

The company’s growth efforts over the years will culminate in its listing exercise next month. Tashin aims to be listed on the Ace market on August 1. The initial public offering (IPO) exercise will raise RM34.41mil for the company which will be used to build a 90,000sq ft factory in Seberang Prai, purchase machinery and equipment to manufacture wire mesh and upgrade its steel processing line, among other things.

It hopes to ride on the growth prospects of the steel market in Malaysia to support its expansion plans. Lim says Tashin is spending RM25mil to expand its operations in the country.

According to Lim, demand for steel is expected to recover moderately over the second half of 2019 and into 2020 as the expected commencement of mega projects such as the East Coast Rail Link (ECRL) and Bandar Malaysia will help to boost the current dampened steel demand.

Better days ahead: Lim expects the upcoming commencement of mega projects to boost demand for steel products.
Better days ahead: Lim expects the upcoming commencement of mega projects to boost demand for steel products.

“These projects will stimulate demand for our slit coils, steel sheets, steel wire products and steel pipes.

“Smith Zander, a specialist research and consulting firm based in Kuala Lumpur, projects that the market for slit coil and steel sheet will grow to 5.1 million tonnes in 2020 from 4.89 million tonnes in 2017 at a compounded annual growth rate (CAGR) of 1.41%.

“It also forecast that the consumption of steel wire products such as steel pipes and tubes will grow at a 13.3% CAGR to 2.85 million tonnes in 2020 from 2.56 million tonnes in 2017,” says Lim.

He also notes that the construction and furniture sectors as well as building material suppliers contribute about 50% of the group’s revenue.

The automotive industry and steel-based product manufacturers – those involved in making electrical appliances and mechanical and engineering components – generate the other 50% of the group’s revenue.

Lim thinks there are enough supportive factors in the market that will help the company.

According to the Malaysian Automotive Association (MAA), there are about 800 automotive component manufacturers in Malaysia, producing a wide range of steel body panels, engine parts, brake parts and transmission and steering parts.

The MAA forecasts that total industry volume (TIV) in Malaysia will grow from 600,000 vehicles in 2019 to 653,290 vehicles in 2023, growing at a rate of 2.15%, driven mostly by public transportation and increasing disposable income of the population.

Tashin also plans to venture into the wire mesh production business.

“We are presently involved in the trading of wire mesh and the expansion into the manufacturing of wire mesh will allow us to have control over the supply of wire mesh to reduce our dependency on third party suppliers for wire mesh.

“The manufacturing of wire mesh will also enable us to have better control over our cost of sales and this will improve our profitability.

“Wire mesh is a steel product used as concrete reinforcement in the construction industry. The product is increasingly used in place of steel bar products as concrete reinforcement materials because of the lower installation cost and time as compared to steel bar products,” says Lim.

Tashin will use RM4.1mil from the IPO proceeds to acquire five new wire mesh production lines with a combined effective production capacity of 24,000 tonnes per annum.

“We expect to commence the production of wire mesh upon completion of the construction of the new factory in 2021,” Lim says.

Tashin is an associate company of Prestar Resources Bhd, a main-board investment holding company with subsidiary companies mainly engaged in the steel-processing and steel-products manufacturing activities with factories in Malaysia and Vietnam.

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