This article first appeared in The Edge Financial Daily on October 9, 2017 - October 15, 2017

KUALA LUMPUR: Emico Holdings Bhd, the country’s leading awards and trophy components manufacturer, is hoping for a bigger top-line growth after introducing a new sublimation printing machine in the market.

Its managing director Jimmy Ong Chin Keng (pic) said the machine is seen as revolutionary in the Malaysian trophy industry as it is able to print on wooden, glass, aluminium or flat-surface plaques for souvenirs and trophies.

“We expect the effects [on revenue] to kick in in the fourth quarter. For the whole calendar year, we expect to see about RM3 million from the sale of the machines to our distributors,” Ong told The Edge Financial Daily.

“We have about 300 to 400 trophy and souvenir sellers who would be able to increase their range of products sold,” he said, adding that Emico will test the Malaysian market before expanding the machine’s sale beyond the shores.

Ong said that despite recording a net loss of RM566,000 for the first financial quarter ended June 30, 2017 (1QFY18), on a lower revenue of RM12.4 million, the outlook for FY18 remains positive.

“Apart from the sublimation machine, we are also at the final stage of automating our plant which would increase production for trophies and original equipment manufacturing (OEM) capacity by 20%,” he added. The OEM segment produces medical consumable products and marine engineering products.

It recently began manufacturing water jet engine covers for ships and containers, in a small scale, under the marine engineering segment.

“We have just started doing this because we have the expertise in plastic engineering. The engine cover, using high-end plastic, should be able to withstand heat.

“The water jets are used to clean ships, and oil discharge in containers on tankers. It also serves to deter pirates from climbing ships as the water jets are fitted on the side of ships,” added Ong.

Ong expects engine cover manufacturing, which is a move up the value chain, to contribute about 5% to the overall OEM segment.

Emico is at the tail end of automating its manufacturing process, which it hopes will result in quicker delivery time and a 20% rise in capacity, which in turn means more orders can be accepted in the future. About RM2 million was allocated for this purpose in FY18.

The process will also reduce labour by 10% by FY19, eventually cutting down its reliance on workers, 50% of whom are foreigners.

The Penang-based company is also involved in the trading of home furnishing and household items for European customers, and also in property development.

Ong said the group’s net loss in 1QFY18 was mainly due to the lower contribution from the property segment (where development revenue was not realised) and a fall in the local trophy business.

Revenue from its export business from trophies and manufacturing was about 15% higher in the quarter, he said.

“We expect the turnover from our core business — trophy (50% contribution to revenue) and manufacturing (27%) to remain high as long as the US dollar stays around RM4.20,” said Ong.

He acknowledged that there is plenty of room to grow in the trophy market. The group currently ranks No 2 globally for plastic trophies, and No 1 in Southeast Asia. Emico, which exports its products to 45 countries, plans to penetrate Russia and expand further in Southeast Asia.

Its largest revenue market is Europe (65%), followed by North America (20%), and Asia (15%).

“Russia is a big country and the potential to grow is wide. We will be going there in March to meet with local parties in a trade trip organised by the Federation of Malaysian manufacturers,” Ong said.

On its trading business, Ong said Emico is in the midst of engaging a new client after one of its main customers, who owns a chain of 40 to 50 home furniture retailers in the UK, closed down in the fourth quarter of 2016.

“We made a revenue of RM15 million in FY16, but when the chain shut down due to Brexit, revenue dropped to RM4.9 million in FY17.

“It might take one to two years to secure a deal with this prospective client who is involved in online home furnishing and household products,” he said.

Emico acts as the middleman for European customers where it conducts quality control checks on furniture ordered from China before being shipped to the continent.

Emico posted a net profit of RM1.6 million in FY17, compared with RM3.7 million a year ago, as a result of lower property development and trading contribution. Revenue fell 56.3% to RM70.3 million from RM80 million.

The group cleaned its balance sheet after a capital reduction exercise that sliced 90 sen from its RM1 par value shares to raise funds to pare off accumulated losses of RM74.54 million last year.

Emico’s share price closed at 23.5 sen last Friday, with a market capitalisation of RM22.5 million.