This article first appeared in The Edge Malaysia Weekly on July 1, 2024 - July 7, 2024

AFTER nearly five years as a Practice Note 17 (PN17) company, FSBM Holdings Bhd (KL:FSBM) exited financially distressed status in mid-June when Bursa Malaysia green-lit its submission.

The main-market listed company is a different entity now, having undergone a significant transformation in recent years, says Pang Kiew Kun, who is the company’s new managing director.

FSBM has pivoted its business model to providing software-based technology solutions, primarily targeting the manufacturing and semiconductor sectors. Previously, it was the sole distributor of Fujitsu products in Malaysia.

“FSBM is a completely different company now,” Pang explains in an interview with The Edge. “We have become an asset-light business, offering software solutions that encompass the Internet of Things (IoT), data analytics and support services specifically for the semiconductor industry.

“We plan to integrate artificial intelligence (AI) into our offerings soon. While I’m cautious about overusing terms like IoT and AI, these are crucial components for local manufacturers to improve operational efficiency, aligning perfectly with Industry 4.0 goals.”

FSBM currently supports 80 small and medium enterprises (SMEs) in Malaysia. “Our next step is to scale our solutions to larger manufacturing companies, particularly those in the semiconductor sector,” Pang says.

Recognising the potential of AI in the country, FSBM is positioning itself as a facilitator for AI adoption. The group is in advanced talks with a US-based technology company to become a distributor of its AI hardware and software solutions.

“This aligns with the ongoing development of data centres in Malaysia and the government’s initiatives to advance the value chain of the domestic semiconductor sector,” says Pang, declining to reveal the US company’s name because the negotiations are ongoing. He expects to close the deal as early as the end of July.

Already, FSBM has been working with several companies to expand its technology solutions portfolio.

Last month, the group signed an exclusive distribution agreement with T-Parus Trading Co Ltd, a Taiwan-based company, for its voltage surge protectors (VSPs). The technology is known for its multifunctional capabilities and ensures uninterrupted power supply, safeguarding sensitive electronic equipment from damage.

“T-Parus is a leading supplier of advanced systems specifically for the Taiwanese semiconductor industry,” says Pang. “We are honoured to represent their innovative solutions in Malaysia. VSPs are critical for maintaining operational continuity and protecting sensitive equipment, especially as Malaysia aims towards advanced packaging in the semiconductor sector. Additionally, uninterrupted power supply is essential for data centre operations.”

Among T-Parus’ clients in Taiwan are semiconductor giants such as Taiwan Semiconductor Manufacturing Co Ltd, ASE Technology Holding Co and Siliconware Precision Industries.

At the signing, FSBM forged a collaboration with Unitrade Industries Bhd (KL:UNITRAD) to expand the market reach of VSP and energy-saving compressors to commercial and industrial customers across Southeast Asia.

“We understand that Unitrade is already providing steel pipes for data centres, this is where we can work with them to enhance the product offerings,” Pang says.

Previously, when FSBM was the sole distributor of Fujitsu products in Malaysia, it relied on the government for most of its contracts. Subsequently, its revenue became stagnant and, worse, losses began to pile up.

Founded by Datuk Tan Hock San, 71, currently a non-independent and non-executive director, FSBM slipped into PN17 status in 2019 after its external auditor flagged its financial statements due to insufficient audit evidence.  Tan now holds only 2,400 shares in the company, which is less than 0.01%. He ceased to be a substantial shareholder of FSBM in March 2022.

 Over the past five years, the company worked on a regularisation plan, which was completed in December 2023, after it raised some RM12 million through a rights issue. During the fundraising exercise, Dagang Nexchange Bhd (KL:DNEX) executive chairman Tan Sri Syed Zainal Abidin Syed Mamed Tahir emerged as a substantial shareholder after acquiring 30 million shares or a 12.68% stake in FSBM. 

At the same time, Pang and FSBM’s chief technology officer Low Kang Wei also increased their stakes in the company during the corporate exercise. Pang’s shareholding in the company increased to 7.94% or 18.79 million shares after the acquisition of 16 million shares in FSBM, while Low purchased 14 million shares or a 5.92% stake. The duo are estimated to have forked out RM1.28 million and RM1.12 million respectively. 

Pang first emerged in FSBM in October 2021, when he was appointed as an executive director in the company. He later emerged as a  shareholder after converting his warrants to 2.79 million shares, or a 1.86% stake, in May 2022. Pang was then redesignated as managing director in May this year. 

FSBM’s share price has slipped from 43 sen apiece at the time it exited PN17 to last Thursday’s close of 32 sen, which translates into a market capitalisation of RM157.9 million.  

Pang is quick to point out that since the restructuring, FSBM has achieved organic profitability for six consecutive quarters after it started focusing on smart manufacturing technology. As at March 31, 2024, the company boasts a net cash position of RM13.22 million.

Its first-quarter results for 2024 show promise, notching up a net profit of RM654,000 on the back of RM3.38 million revenue, compared with the previous year’s RM217,000 net profit on RM3.11 million revenue.

For 1QFY2024, its earnings per share came in at 0.14 sen. Assuming 20% quarter-on-quarter earnings growth in the remaining three quarters, FSBM’s estimated EPS will be 0.168 sen in 2QFY2024, 0.20 sen in 3QFY2024 and 0.24 sen in 4QFY2024. The annual estimated EPS will be 0.748 sen, implying the stock is trading at forecast price-earnings ratio of 43.45 times.

While acknowledging challenges in getting companies to adopt IoT and AI, Pang emphasises FSBM’s client-centric approach, tailoring services to address specific needs. He emphasises the cost-saving benefits and is keen to educate potential clients on the importance of such systems. FSBM is also actively seeking partnerships to further enhance its offerings.

“First, we need to understand their pain points,” Pang explains. “IoT allows manufacturers to achieve optimal machine performance through a more systematic and automated approach. Previously, any machine issues were only detected manually at later stages. Through IoT, they can immediately identify problems with each machine based on its output.

“Because, at the end of the day it is more costly for manufacturers to run inefficiently. We need to educate more companies to understand the importance of having these systems in place,” says Pang who is optimistic that FSBM could continue with its FY2023 performance this year driven by its smart manufacturing business. 

He acknowledges the nascent stage of data centre development in Malaysia but expresses confidence that providing solutions for this sector will be a game changer for the group. “For the data centre, it is still in the early stage of development in Malaysia. But, we are working on providing the solutions for them,  for instance our collaboration with T-Parus and Unitrade,  which will be a game changer for the group.”

Malaysia currently hosts over 40 operational data centres, each with capacities ranging from 100mw to 150mw. However, upcoming projects indicate an anticipated additional capacity of 1,400mw over the next five to 10 years, driven by low land and energy costs. 

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