KUALA LUMPUR: Yew Lee Pacific Group Bhd (YLP) has set plans to extend its portfolio of industrial brushes and strengthen its market position in Malaysia's industrial brush business in the next few years.
The company is also moving towards improving its manufacturing efficiency and automating manufacturing processes to support the long-term growth of its business.
Chief operating officer and executive director Amber Ang Poh Yee said YLP would expand its trading of industrial hardware and machinery parts business segment and expand its geographical presence to international markets.
"We aim to capture future opportunities by purchasing additional manufacturing machinery and equipment, construction of our new warehouse facilities and 3-storey office building, and renovation of our new office," she told The New Straits Times.
Ang said YLP's future earnings and growth would rely on the rubber glove manufacturing business in the next two years when asked about future plans.
She expects the local glove manufacturing industry to create a rising demand for industrial brushes, especially locally-made industrial brushes.
"We are fortunate to have a broad range of end-user markets depending on industrial brushes, such as rubber gloves and agricultural industries.
"We are also fortunate to have government support, as they have been actively promoting the growth of our manufacturing industries to be competitive in the global arena," she said.
The company aims to be the industry leader in manufacturing industrial brushes, both domestically and regionally.
YLP manufactures industrial brushes and trades industrial hardware and machinery parts.
Its products range from technical and industrial brushes to household brushes and sweeping and cleaning brushes.
Industrial brushes are either hand-held or attached to manufacturing machinery or equipment used for heavy-duty scrubbing or surface treatment.
Last week, YLP launched its prospectus for an initial public offering (IPO), leading to Bursa Malaysia's ACE Market listing.
The company's IPO entails the issuance of 133.10 million new shares at RM0.28 per share and a private placement of 26.62 million existing shares to selected investors.
The IPO is anticipated to generate gross proceeds of RM37.27 million, of which RM10.90 million will be used for the purchase of machinery and equipment, RM7.30 million for the construction of a warehouse facility and office building, RM1.80 million for the renovation of an office building, RM8.90 million for the repayment of bank borrowings, RM4.57 million for working capital, and RM3.27 million for listing expenses.
M&A Securities Sdn Bhd is the principal adviser, sponsor, underwriter and placement agent for YLP's IPO, while Eco Asia Capital Advisory Sdn Bhd is the financial adviser.
According to YLP's prospectus, the domestic industrial brush industry expanded by 27.4 per cent to reach RM254.5 million in 2021, backed by the strong growth in the manufacturing sector.
During the year, both import and export values of industrial brushes showed a significant increase compared with the previous year.
Industrial brush imports reached RM192.8 million in 2021, an increase of 28.6 per cent from 2020, while exports hit a value of RM61.7 million during the year, which was an increase of 23.9 per cent from 2020.
Going forward, YLP's prospectus shows that the industrial brush industry in Malaysia is forecasted to reach RM285.0 million in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 9.6 per cent reach RM402.3 million by 2026.
According to the IMR Report, the domestic brush industry is projected to expand at a CAGR of 7.5 per cent to reach RM286.6 million in 2025.
Mercury Securities Sdn Bhd is upbeat about YLP for its strong market presence in Malaysia's industrial brush industry and vast geographical footprint across Asia.
In a recent report, the research firm said YLP is one of the largest players in Malaysia's industrial brush industry, commanding a market share of 12.4 per cent of the RM254.5 million industry size in Malaysia as of 2021.
To expand its revenue and to further strengthen its market share, the company plans to expand the range of industrial brushes to cater to the specific manufacturing needs of other end customers from the
quarry, semiconductor, and glass-making sectors.
"We think that with the expansion plans online, the company is well-positioned to expand its presence locally on the backdrop of a growing Malaysian industrial brush industry, which Protégé Associates projects to grow at a 5-year CAGR of 9.6 per cent from 2022 to 2026," Mercury Securities said.
The research firm has a Subscribe call on YLP with a target price of RM0.33 based on FY23 earnings-per-share (EPS) of 2.3 sen and a price-to-earnings (PE) of 14.4x, which is a 40 per cent discount to the industrial sector's 5-year average PE.
The target price represents a potential return of 18.0 per cent over the IPO price, Mercury Securities noted.
Touching on earnings, Ang said YLP's revenue generated from the manufacturing segment amounts to 63.5 per cent, 65.5 per cent and 70.3 per cent of the company's revenue for FY19, FY20 and FY21, respectively.
The growth in the manufacturing segment was mainly driven by demand from customers involved in the rubber glove manufacturing industry.
Revenue generated from the trading segment registered a growth of 7.7 per cent in FY19 and 36.2 per cent in FY20, mainly due to higher sales received from the rubber glove manufacturing customers.
During FY21, the decrease in revenue generated from the trading segment by 6.7 per cent was mainly due to a lower volume of industrial hardware and machinery parts sold to rubber glove manufacturing customers.
By geographical location, Malaysia remains YLP's largest revenue contributor, contributing between 85.8 per cent, 81.4 per cent and 76.8 per cent of its total revenue for FY19, FY20 and FY21, respectively.
Other countries include Thailand, Vietnam, Indonesia, and Taiwan.
On the other hand, YLP's largest revenue contributor comes from the rubber glove manufacturing industry, contributing between 78.7 per cent, 88.0 per cent and 85.4 per cent of the total revenue for FY19, FY20 and FY21, respectively.