This article first appeared in The Edge Malaysia Weekly on January 29, 2024 - February 4, 2024

FOR decades, Penang-based Volcano Bhd made a name for itself for making nameplates, essentially becoming the brand behind brands.

Quite impressively, in the early 2000s, almost every logo of personal computer (PC) and printer giant HP Inc was crafted by Volcano at its Penang plant.

In 2008, the group set up operations in Rayong, Thailand, to carry out not just nameplate manufacturing, but also to diversify into the plastic injection business. After all, the robust automotive cluster in Rayong is the “Detroit of Asia” and companies from around the world have set up there, such as Sumitomo Rubber Thailand Co Ltd, a Japanese tyre manufacturer with factories situated directly across from Volcano’s plant at Amata City Rayong Industrial Estate.

Each evening, Sumitomo Rubber facilitates transport for its workforce using 20 to 30 buses, exemplifying the thriving industrial ecosystem in Rayong.

In an interview with The Edge during a site visit to Rayong, Volcano co-founder and executive director Yeap Guan Seng says the nameplates and plastic parts specialist is hoping to capture more opportunities in the automotive industry, especially in the electric vehicle (EV) space.

“Amid the trade diversion, we are seeing plenty of opportunities in Malaysia and Thailand. Volcano is in a sweet spot because we have operations in both countries. I believe prospects are bright for our company over the next three to five years,” he says.

Yeap reveals that Volcano, which has been producing nameplates and plastic parts for its automotive clients, is now eyeing a new segment — the assembly of smart battery packs for a possible new client.

“Volcano is looking into producing more EV parts for the automotive industry. In fact, we are already involved in the assembly of electric bikes. The next game changer for us is the assembly of the smart battery pack, which is a standalone module,” he explains.

Yeap says Volcano is currently in talks with a multinational battery technology firm that provides advanced energy storage solutions for the automotive industry.

“Once we secure the order, we will start producing for them in our Penang plant as the main factory, whereas our Rayong plant will be a backup factory to avoid any disruption. We will make the plastic casing and do the metal stamping but we will source the PCB (printed circuit board) from third parties in Penang.

“The module that we will be producing for them is a new slim unit, which will be attached to the top of the conventional battery pack. We will make the whole smart battery box set, consisting of a PCB and control board,” he says.

It is learnt that the control set communicates with the user’s phone through Bluetooth, providing updates on the health and status of both the battery and the car.

“We are not making the car battery but we are making a new module that is attached to the battery. When we complete the whole assembly of the smart battery, we will ship it to our (potential new) customer, who will then sell it to users who want to buy it to attach to their conventional car battery.

“Meanwhile, our potential new customer is working closely with some car companies to come out with a totally new smart battery system. So, in the future, when you buy a new car, this smart battery pack is already there,” says Yeap.

Initially, he adds, this potential new customer was expected to give Volcano its first order by early January, but it will now be delayed to June.

Nevertheless, Yeap remains confident of the new segment.

“Volcano has been quite a low-profile company. We do not like to over-promise our shareholders. We prefer to under-promise and over-deliver. If you look at our operations in Rayong, we have been around in Thailand for more than 15 years.

“We have gained a foothold and good reputation here. We will not stop here. We will continue to innovate and invest in new technology as we expand our operations and clientele,” he says.

Volcano, which made its debut on the ACE Market of Bursa Malaysia in April 2021, was co-founded by the group’s managing director Datuk Ch’ng Huat Seng (15.53% equity interest), its executive directors Datuk Wong Tze Peng (13.54%), Gan Yew Thiam (11.67%) and Yeap (5.92%) more than two decades ago in 1999.

Despite being a small cap, Volcano has attracted quite a number of institutional funds, including Phillip Capital Management Sdn Bhd, Areca Capital Sdn Bhd and UOB Asset Management (M) Bhd.

Yeap recalls that the four co-founders started Volcano in a rented shoplot in Penang. Between 2002 and 2004, the company secured its maiden order from Hewlett-Packard Asia Pacific Pte Ltd, and subsequently moved the entire operation to its own current factory.

“In the early 2000s, HP only had two nameplate suppliers — an American manufacturer and us. When the Iraq War erupted in 2003, the global supply chain was disrupted. At one time, almost 100%, if not 100% of HP’s logo was made by Volcano.

“Today, HP has about four to five nameplate suppliers in the world, but we remain the leading player with a market share of more than 50%. Those days, HP’s contribution to our sales was as high as 90%. But today, as we have diversified our customer base, its contribution has declined to about 40%, which means we no longer solely depend on them,” he says.

In 2008, Volcano ventured into Thailand to carry out its nameplate manufacturing and plastic injection businesses at a rented factory in Rayong. Its first customer in Thailand was whiteware giant Fisher & Paykel Appliances Holdings Ltd. Three years later, the group moved its operations in Thailand to its own manufacturing plant.

Today, Volcano is capable of providing services such as sub assembly, spray painting, silk screen printing, pad printing, UV inkjet printing, hot stamping, laser cutting and laser engraving. In addition, the group is gradually moving into producing membrane switch panels.

Volcano generated a profit of RM9.1 million on revenue of RM112 million in the 18-month financial period ended June 30, 2023 (18M FY2023). The group made a profit of RM1.72 million in the first quarter ended Sept 30, 2023 (1QFY2024). As at Sept 30 last year, its net cash position stood at RM28.6 million.

Over the past six months, Volcano’s share price has declined 32% and it ended at 68 sen last Friday, giving it a market capitalisation of RM123.51 million. The counter is currently trading at a historical price-earnings ratio (PER) of 21 times.

Volcano currently operates two factories. The group’s first plant in Penang is operated by its subsidiary Volcano Name Plate Sdn Bhd (VNP), and hence, dubbed VNP1, which mainly produces nameplates for the Singapore market. Its most prominent client is HP.

“We bought a one-acre plot with a vacant one-storey factory and a two-storey office in Bukit Tengah, Penang. The acquisition was completed in end-November last year. We plan to set up a new factory, dubbed VNP2, there,” says Yeap.

Volcano’s second plant is operated by its Thai subsidiary Volcano Tec (Thailand) Co Ltd (VTT). The factory in Rayong, dubbed VTT1, is equipped with injection machines with robotic arms.

About 40% of VTT’s revenue comes from the home appliance segment with Fisher & Paykel as its main client. Another 30% of revenue is derived from automotive parts and 20% from electrical parts.

“Between 2022 and 2023, we acquired a four-acre parcel in Rayong for RM5.68 million — fully paid for via internally generated funds — to construct our second factory in Thailand named VTT2, which will be located just about 10 minutes or 5.3km from VTT1,” says Yeap.

Apart from HP and Fisher & Paykel, Volcano’s other major customers include filtration company Donaldson Company Inc as well as sewing and embroidery systems manufacturer Bernina International AG.

Volcano had in March last year proposed to raise up to RM42.77 million via a 30% private placement, of which RM38 million was to fund the construction of new factories in Penang and Rayong.

To date, Volcano has placed out one-third of its planned placement shares, and the company is in the midst of placing out the remaining two-thirds. 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.