AUTOMATION specialist for high-end manufacturers Cnergenz Bhd has done well since its recent listing.
For its most recent quarter ended June 30, 2022, the electronics manufacturing solutions provider reported a 158.33% increase in net profit on a quarterly basis.
This could very well explain the performance of its share price, which is up 66.38% since its listing only in May this year. In comparison, the FBM KLCI had fallen by 2.23% during this period.
Cnergenz was listed on Bursa Malaysia’s ACE market with a historic price-earnings (PE) ratio of 19.27 times. Now, its PE ratio stands at 30.91 times, according to data from Bloomberg.
The question, however, is whether the group can maintain such a growth trajectory, or even match its latest quarterly result, given global concerns of an economic slowdown.
One thing for Cnergenz, however, is that it is not a new company.
It can trace its beginnings back to 2004.
“We are very experienced in what we do. All of our new business comes from referrals or comes from existing customers through repeat sales,” Managing Director Lye Yhin Choy told StarBizWeek.
“Over the years, we have evolved and now we can build production lines from scratch,” says Yhin Choy.
The company’s business now consists of designing, developing and commissioning end-to-end production line systems. And it is aimed at the electronics and semiconductor industry. He has amassed a large portfolio of clients across all industries.
“We have established working relationships with our customers and suppliers that span 12 to 17 years. We try to provide them with the best solutions that are not only cost effective but also increase their productivity.
“Thanks to our proven expertise, our clients grow with us. When they have extensions or new offers, they choose to work with us again,” says Yhin Choy.
Managing Director and Executive Director Lye Thim Loong says that at present the group has 113 customers in sectors such as 5G telecommunications, electronic manufacturing services, medical, semiconductors, industrial and the Internet of Things.
“We are not solely dependent on one client. A client may be our first client that year and not the following year.
“Right now, we are already seeing a slowdown in consumer electronics, but that has been offset by demand from other industries. Our diversified business model will protect us from the effects of a recession, should it arise. have one,” he says.
Since the early 2000s, a number of industry players have migrated from Malaysia to Thailand due to lower manufacturing costs. Yhin Choy says Cnergenz has followed this trend and it’s what has helped him venture into Thailand since 2006.
In 2008, the band also ventured into Vietnam.
“Because of our strong presence in Malaysia, we actually went to support our customers who were then opening new subsidiaries and factories in Thailand.
“Soon after, when the global financial crisis hit in 2008, many factories in the United States and South Korea started looking to Vietnam for expansion. We also followed this trend,” says Yhin Choy.
Currently, sales from Thailand and Vietnam account for 50% of turnover, while local sales account for the other half.
Other economic factors such as U.S.-China trade diversion, China+1 policy and de-globalization will contribute to its growth momentum, Yhin Choy said.
“Our business relies on the capital expenditure (capex) of our customers. With all of these economic factors in play, many multinational corporations operating in China will seek to expand into other countries.
“We believe the bulk of these transfers will be in the three markets in which we operate and over the next three to five years capital expenditure is expected to be very high in these regions,” says Thim Loong.
He adds that the rise of digitization will also benefit Cnergenz.
“With digitization, there are components like IR4.0, 5G and electric vehicles that drive it. There is nothing like going back once digitization has taken place.
“This is why the group is quite optimistic now. This is also why we decided to be listed, to develop our new business of automation”, he specifies.
To date, the group has completed a project with a customer in Vietnam, where Cnergenz was able to help the customer achieve cost savings of up to 88% with the automation solutions offered by the group.
“This project was in Vietnam and as you know, Vietnamese workers are cheap, so why did the customer still choose to automate their production? The reason is that automation helps to reduce production costs. exploitation as well as human error,” explains Yhin Choy.
The group believes that automation is the way forward in manufacturing and the solution to Malaysia’s labor issues.
“If Malaysia continues to import cheap labor from other countries, our country will never be freed from the labor trap it finds itself in.
“Automation will not only help us move up the value chain and thereby increase our per capita income, but it will also improve the status of Malaysian workers, as many more can be freed up to be qualified for more skilled jobs. “, says Yhin Choy. .