This article first appeared in The Edge Malaysia Weekly on April 17, 2017 - April 23, 2017

PENANG-based IQ Group Holdings Bhd is seeing strong market acceptance of its products, which range from sensors, sensor-controlled lighting and intelligent lighting solutions to door chimes. This is evidenced by the group’s financial performance thus far — its net profit for the nine months ended Dec 31, 2016 (9MFY2017), of RM21.97 million has already surpassed its FY2016 net profit of RM20.86 million.

Revenue for 9MFY2017, which stood at RM151.4 million, is also an increase of 9% year on year. However, managing director and CEO Daniel John Beasley, a British national who has helmed IQ since December 2006, declined to comment whether it would be a record year for the group.

“It is clearly a very good year, but we are not able to comment further on this until the [4QFY2017] results are released,” he tells The Edge.

Nevertheless, he says the group’s continual focus on innovation has led to strong market acceptance of its products by both customers and end users.

IQ, as an original design manufacturer (ODM), works with customers to create new products on their behalf. About 87% of the group’s sales and profit are derived from this business.

“We do sell sensors and LED lighting products to ODM customers, which ultimately use their own brands. However, we are not able to disclose the names [of these customers] due to the non-disclosure agreements by which we are bound,” says Beasley.

Alternatively, customers can simply choose to buy IQ’s existing range of products. These include the Passive Infra Red (PIR) sensor, which, in layman’s terms, is a device that can switch on lights, activate an alarm or open a door when movement is detected.

IQ also manufactures motion-controlled LED and traditional lighting as well as wire-free door entry systems and door chimes.

“There is a progressive shift within IQ’s business to a more professional, commercial or even industrial product mix from retail where margin positions are more attractive,” says Beasley.

As at February, sensor lighting and lighting products contributed 55.3% to the group’s revenue, standalone sensors contributed 32.3% and door entry products, 12.4%.

The group also intends to drive up sales of its own brand products, namely Lumiqs products, which are intelligent lighting systems designed to provide light only when and where it is needed, and at only the minimum level of brightness required. When correctly configured, both of these factors can contribute to significant energy savings, particularly at places that are often unoccupied.

“As an internal target, we aim to achieve 30% revenue from Lumiqs products by 2020. We have a growing global community of resellers who are marketing Lumiqs products, primarily focused on the Intelligent LED Highbay solutions, which are used for warehouses and other commercial applications,” says Beasley.

At present, 96% of the group’s sales are generated from overseas, with continental Europe accounting for 32.5%; the UK, 26%; Japan, 22.5%; and the US, 15%.

Hence, there are advantages and disadvantages for the group when the ringgit weakens against the US dollar.

“About 50% of our costs are from imports, so there are pros and cons when there are fluctuations in the exchange rate. But with the majority of our sales being export-focused, the weaker ringgit ultimately is a bonus for the group at this point in time,” says Beasley.

He says the group will continue to establish business interests in territories it currently does not have an active presence.

IQ has almost no borrowings and was in a net cash position of RM59.3 million as at Dec 31 last year.

Its largest shareholder is executive chairman Chen Wen-Chin, also known as Kent Chen, who controls 64% of the group via his substantial interest in Sensorlite Ltd and Sensorlite Investments Ltd as well as his direct interest. Chen, a Taiwanese, is the founder of IQ Group Sdn Bhd, a subsidiary of the group, and is regarded as one of the pioneers in the PIR motion and sensor device business in Malaysia.

Shareholder optimism seems to be growing of late, judging by the surge in IQ’s share price, which hit an all-time high of RM3.62 on

April 5. From its closing price of RM2.55 on Dec 30 last year, the stock has risen more than 40% in less than four months.

According to a report by LEDinside, the LED industrial lighting market is forecast to grow from US$2.93 billion in 2016 to US$5.2 billion in 2020, representing a compound annual growth rate of over 15%.

“The sensor and LED industries are both growing at a rapid rate. Sensors are increasingly becoming part of our daily lives, especially with the advent of Internet of Things, and as such, we can only expect ever-increasing possibilities,” says Beasley.

“Similarly, the lighting industry has undergone a revolution in recent years with the rapid shift from traditional energy-hungry lighting solutions to LED-based technology. This revolution continues both in terms of a change from traditional lighting to LED and a continual market appetite for ever-evolving LED performance expectations.

“When we combine sensors and LEDs, we are then entering the space of intelligent solutions, where the opportunities are endless.”

Should the demand for intelligent lighting grow in the future, especially with companies looking to minimise operational expenditure by reducing power consumption, it would definitely be a bright spot for IQ.

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