Ta Win’s new shareholders gunning for faster growth

TheEdge Tue, Jun 25, 2019 04:00pm - 2 years ago

AS a small-cap company run by shareholders who have been pretty conservative, Ta Win Holdings Bhd has been overshadowed in the past by more high-profile peers like Metrod Holdings Bhd.

While it has had an opportunity to carve out a profitable niche for itself, the copper wire and rod manufacturer has focused largely on Malaysia, its home market, where profit margins are relatively thin and susceptible to fluctuations of copper prices.

But new shareholders are changing that.

Ta Win chief financial and chief operating officer Stan Zabolotsky is one of a crop of new leaders handed the job of accelerating growth by diversifying the loss-making group’s revenue base beyond a pure copper wire and rod offering into higher-margin businesses.

The 30-year-old Zabolotsky, who assumed the role of CFO in June last year and COO six months later, says the group might still be loss-making in the 18 months ending June 30, 2019 (FY2019), but sees a return to profit in FY2020. (The company is changing its financial year-end from Dec 31 to June 30.)

Ta Win reported a net loss of RM7.07 million on revenue of RM458.81 million for the 15 months to March 31, 2019, compared to a net profit of RM2.75 million on revenue of RM401.52 million in the 12 months ended Dec 31, 2017, due to lower sales volume as it cut unprofitable segments and incurred fair value loss on derivative liability.

Ta Win’s share price has largely remained stagnant at 52 sen over the past one year. The company is still relatively small with a market cap of RM41.4 million.

However, Zabolotsky is clear that the group has no plans to compete against its larger rival, Metrod, in terms of size. Metrod recently revealed plans to invest more than RM1.1 billion to build the largest copper rod manufacturing plant in Southeast Asia.

“Our focus is about stabilising our existing business and making sure that we build a sustainable, profitable business going forward,” he says in an interview with The Edge, citing infrastructure, renewable energy and transport as three areas of potential high growth for copper.

Ta Win’s optimistic outlook comes despite copper price fluctuations caused by the US-China trade war. Because of the recent breakdown in trade negotiations between the two countries, copper prices fell to US$5,900 per tonne from US$6,500 and remain volatile.

“The fluctuation in copper prices is also one of the factors impacting the group’s performance. However, this is offset somewhat by back-to-back orders,” says Zabolotsky.

On Oct 6, 2017, businessman Datuk Yeo Boon Leong, via his private investment vehicle Pioneer Conglomerate Sdn Bhd, emerged as a substantial shareholder in Ta Win with a 5.44% stake. Yeo is also the executive chairman and largest shareholder of cast acrylic sheets maker Asia Poly Holdings Bhd, with a 21.35% stake as at April 1.

Since then, Yeo has been accumulating more shares in Ta Win through Pioneer Conglomerate and Tenggara Kapital Sdn Bhd, growing his stake to as much as 29.43% as at January. However, on April 12, he disposed of his shares in Pioneer Conglomerate, leaving him with 10.05% of Ta Win.

Apart from Yeo, Ta Win executive director Tan Poo Chuan and Pang Chong Yong have also emerged as substantial shareholders. Tan holds 10.07% of Ta Win via Tenggara Kapital, while Pang has a 9.09% stake via Ampol Accesories Sdn Bhd, following the subscription of a private placement in November last year.

Taiwanese businessman Chen Hsi-Tao, whose family was once Ta Win’s biggest investor, has been paring down its stake since June 2017. On June 29, 2018, a Bursa Malaysia filing showed Hsi-Tao and his son Chen Hung-Lin had resigned as deputy chairman and managing director of the company respectively. Hsi-Tao and his family owned 13.7% of Ta Win as at July 3, 2018.

Ta Win currently operates a 1,000-tonne furnace at its 10-acre factory in Melaka, which runs at full capacity most of the time.

“We have started to manage the revenue mix to make sure that we produce more higher-margin products rather than accept any orders that we get. This has improved our margins substantially. The margins in this business are quite thin, so any improvement is good improvement,” says Zabolotsky.

The firm recently struck a deal with Justin Wong Chee Feng, Wong Ah Piaw and Latitude Technology Sdn Bhd to help set up a new cable manufacturing business that utilises electron beam irradiation technology.

“These wire and cable products will be specifically for the automotive and home appliances sectors, which fetch higher margins,” says Zabolotsky, who expects the new business to account for about 25% of total business by FY2020.

Ta Win will spend about RM10 million to RM15 million in FY2020 on new equipment for the cable manufacturing business, as well as to replace existing equipment used to manufacture copper wire and rods.

It also expects to benefit from China’s move to clamp down on scrap imports come July 1, which will result in Chinese buyers, including manufacturers who blend scrap metal into their products, facing shortages.

Tan says on Oct 10 last year, the group entered into a joint venture with Full Dragon Electric (Guang Dong) Co Ltd and Wing Ying Non-Ferrous Trading Ltd to process locally sourced recycled copper to manufacture rods for the China market. Ta Win holds a controlling 65% stake in the JV while the other two companies own the remaining 35%.

“The Chinese partners will transfer the technology and know-how to us to produce the recycled copper. The two parties have also signed an agreement for the recycled copper offtake,” he adds.

The group is adding two new furnaces for this new business, which will bring an additional capacity of 1,200 tonnes per month when fully commissioned by June.

Tan expects the JV to contribute about 3% to group revenue in FY2019, increasing to about 5% by FY2020.

Ta Win is also looking to expand its export markets, such as China, India, the Philippines and Thailand, to reduce its reliance on the domestic market. “We expect domestic contribution to the group’s overall sales to reduce to 50% by end-2019 from about 70% 80% last year,” says Zabolotsky.

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