EITA seeks earnings lift via JVs, M&As

SHAH ALAM: EITA Resources Bhd, which yesterday announced a joint venture with China's Shanghai STEP Electric Corp, aims to grow its elevators and bus duct manufacturing segment to contribute 70% of its top line within five years' time through more joint ventures (JVs) as well as mergers and acquisitions (M&As).
Last year, the manufacturing division contributed 50.7% to the group's revenue.
EITA's wholly-owned subsidiary EITA-Schneider (Mfg) Sdn Bhd has entered into a joint venture agreement with China-listed Shanghai STEP Electric, which also involved in elevator business, to innovate and develop new elevator controller systems to be under the new company, to meet growing demand from Asean and the Middle East.
EITA and Shanghai STEP Electric will each own 50% stake in the joint venture company SIGRINER Automation (Mfg) Sdn Bhd, which has RM1 million in initial issued and paid-up share capital.
EITA group managing director Fu Wing Hoong expects the joint venture will contribute to the group in the future when the manufacturing activities kick start in June this year.
"There is already demand, certain volume is already there, definitely there will be contribution," he told reporters after the signing ceremony.
He expects the elevators contribution will increase towards the last quarter of the current financial year ended September 2015 following the award of over RM94 million MRT jobs last year to provide escalator and travelator system for underground stations.
"By 2020, we expect the manufacturing (business) to contribute 70% (of total revenue)," Fu said, adding that the current order book stands at over RM200 million.
He said the group is poised to leverage on the growth in the Southeast Asia region, which potentially will become the growth engine of the world due to burgeoning construction activities.
According to Fu, elevator demand in Southeast Asia and the Middle East is estimated at around 75,000 units annually.
To further grow the business, he said EITA has always been on the lookout for JVs and M&As that could provide synergies to the group.
The group has set aside capital expenditure (capex) in excess of RM13 million for the next two years, with RM12 million for the construction of a new manufacturing plant at Bandar Bukit Raja, Klang, which is targeted for completion by the end of 2016.
EITA's three existing plants are located in Penang, Shah Alam and Sungai Buloh.
For the first quarter ended December 31, 2014, EITA reported a 19.39% drop in net profit to RM2.66 million versus RM3.3 million in the previous corresponding period.
EITA's share price was unchanged at RM1.25 yesterday on some 10,000 shares done.
In a separate note, the group said that it has been awarded a RM19.39 million contract for the supply, delivery, installation, testing and commissioning of the lift services at RISDA building in Kuala Lumpur.