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"Looking ahead, we are confident that EG Industries will continue to achieve strong growth in FY2025, driven by robust demand for our advanced high-speed optical modules and AI modules," he said in a statement.
"The recent agreements we’ve secured, including a second Letter of Intent for the exclusive production of next-generation optical modules and a confirmed US$117 million (RM520.3 million) purchase order for 5G photonics-related products, highlight our strategic positioning in the expanding wireless networking technology market.
"With our Smart Factory 4.0 in Batu Kawan coming online in the first quarter of 2025, we anticipate further opportunities to secure additional purchase orders from both our existing key customers and new customers," he added.
EG Industries’ share price rose three sen to close at RM2.03 on Friday, giving the group a market capitalisation of RM915.99 million. The stock has jumped 55 sen or 37.2% since the start of the year.
Here’s a summary of Tguan’s recent developments and outlook in English:
Core Business and Focus
1. Main Business
• The company’s primary focus is producing stretch film, which accounts for nearly half of its business.
• Other operations include manufacturing food packaging, industrial packaging, courier bags, and exporting garbage bags to Japan. They also produce 888-brand tea, coffee, and noodles.
2. Production and Expansion
• Two new production lines for stretch film were installed last year and are now operational, with an overall utilization rate of 60%.
• The company emphasizes quality over quantity, as higher production doesn’t yield good profit margins compared to competitors like Scientex.
• Development in Myanmar has been halted due to geopolitical tensions.
3. Market Strategy
• US Market: The company has deployed a sales team, a sales point, and a warehouse in the US to offer after-sales service and educate customers on proper product use.
• Demand Trends: Demand for food packaging, industrial goods packaging, and courier bags remains steady, with small domestic growth and stable foreign demand.
Financial Overview
1. Bad Debt and Impairment
• In Q4 last year, the company reported RM10 million in bad debt impairment due to a customer’s long-standing payment delays during the MCO (Movement Control Order).
• However, the customer has a repayment plan to settle the debt over the next 4 years, and there’s potential for the impairment to be reversed.
2. Raw Material Costs
• The prices of raw materials (e.g., naphtha, PE, PP) are stable and relatively low, enabling the company to stockpile inventory in Q3 and Q4.
• Low material costs, coupled with a favorable USD exchange rate, may help maintain or improve profit margins.
New Business Initiatives
1. Real Estate Development
• The company is venturing into real estate, developing 200 shop lots next to a LAGENDA housing project.
• This initiative aims to create a complete township, with Phase 1 constructing 60 shop lots.
• Expected profit margins are in the double digits, with strong interest and confidence in selling out the units.
Outlook
1. Growth Expectations
• Q1 growth was satisfactory, but Q2 showed some slowdown, and overall growth for the year may not meet high expectations.
• However, profit margins have room for improvement due to lower raw material costs and exchange rate benefits.
2. Strategic Positioning
• The company is focusing on stable business growth rather than aggressive expansion.
• While valuations remain low, Tguan offers a steady business model but investors should moderate their growth expectations.
Conclusion
Tguan is in a stable phase, prioritizing quality in its core operations while cautiously exploring new opportunities such as real estate. Despite slower growth in the current economic environment, the company’s strong fundamentals, cost control, and diversification strategy provide a solid foundation. While short-term growth may be modest, its low valuation and prudent approach make it a promising candidate for long-term potential.
