This article first appeared in The Edge Malaysia Weekly on August 5, 2024 - August 11, 2024

AUTOMOTIVE seat maker Feytech Holdings Bhd (KL:FEYTECH) is eyeing the country’s central region for its next phase of growth after gaining a foothold in the northern and southern regions, according to its executive director and CEO Connie Go.

The group has been supplying car seats to major automotive original equipment manufacturers (OEMs) such as Kia Malaysia and Mazda Malaysia in the northern region and is now targeting those in the central region. It recently signed a purchase agreement with Proton City Development Corp Sdn Bhd to acquire a 9.76-acre piece of land, located next to Proton City in Tanjong Malim, Perak, for RM20 million to set up a new manufacturing plant.

“Building the facility [in Tanjong Malim] is an important step towards showcasing our determination and commitment to getting more [car seat] contracts from the OEM market segment in the central region. We hope to hold a groundbreaking ceremony for the new facility by October and to start production by 2025,” Go tells The Edge in an interview.

Feytech’s estimated capital expenditure for the financial year ending Dec 31, 2024 (FY2024) is RM52 million, which will be spent on the land acquisition and purchase of new machinery.

The proposed plant will represent Feytech’s third manufacturing location in the country. In 2021, the company made a similar investment in a facility in Kulim, Kedah, after securing its first contract from Kia Malaysia to manufacture car seats for the Kia Carnival MPV and Sorento SUV. It went on to clinch a deal with Mazda Malaysia for the CX-30 in the following year. These three car models are being assembled at the Inokom plant in Kulim.

“In the past three years, our focus has been on the car seat business and the Kulim facility, which is located directly opposite the Inokom plant. We didn’t want to focus on the central region until the facility had reached a mature state, that is, there’s enough work [to keep it functioning]. We feel now is the time for our car seat business to venture into the central region,” says Go. The Kulim plant operated at 39% capacity in the first half of 2024.

The contract wins marked a turning point for Feytech as they helped elevate the group to Tier 1 automotive supplier status. Prior to that, it was a Tier 2 company, producing leather car seat covers at its Tampoi facility in Johor that are sold to automotive OEMs such as Mazda, Proton and Kia, as well as the pre-delivery inspection (PDI) and replacement equipment manufacturer (REM) market segments.

“Our plant in Tampoi is quite new (completed in 2020) and can meet the growing demand for our car seat covers for the next few years,” says Go. Its capacity utilisation rate for leather cutting came in at 59% in the first half of 2024.

As part of its focus on the central region, Feytech plans to set up a new corporate office in the Klang Valley to be more accessible to customers, using some of the RM115 million proceeds from its initial public offering (IPO) in May this year.

Feytech defied the downward trend in the wider automotive industry in 2020 and beat the Covid-19 pandemic with steady sales and profitable years. It enjoyed dramatic increases in net profit and revenue in 2022 after venturing into the car seat business segment. In a June 20 report, Ambank Research notes that revenue per car seat unit is much bigger than that of each car seat cover — by 4 times to 7 times.

Net profit jumped 45% to RM27.6 million in FY2022 from RM19.1 million a year earlier. It rose 59% year on year (y-o-y) to a new high of RM43.9 million in FY2023.

The group posted revenue of RM126.9 million — surpassing the RM100 million mark for the first time — in FY2022, up 49% from RM85.2 million a year earlier. Revenue jumped 66% y-o-y to a record RM211.2 million in FY2023.

In 1QFY2024, net profit was RM16.9 million on revenue of RM70.7 million, about 26.8% and 23.7% of the consensus FY2024 full-year figures of RM63.1 million net profit and RM298 million revenue on Bloomberg.

“So far, we are on track to meet our internal targets. We are looking to better last year’s performance,” says Go.

Feytech’s revenue mix has also flipped, with more contribution coming from car seats than car seat covers. Revenue contribution from car seat covers fell from 45.3% of overall revenue in FY2023 to 37.4% in 1QFY2024. Over the same period, contributions from car seats increased from 38.4% to 51.3%.

“Our car seat division has grown quite significantly since the establishment of Feytech Sdn Bhd. It will continue to be our growth segment for the next few years,” Go points out. 

“Since our IPO, we have successfully onboarded three new car models: the Peugeot 405 and Chery Omoda 5 for car seats and seat covers, and the Proton S70 for car covers.

“Additionally, we have recently been awarded a letter of award for Kia’s Sportage to manufacture seats and seat covers, with revenue recognition from this contract beginning in FY2025,” says Go.

 “We are constantly on the lookout for new business opportunities and are currently in discussions with several carmakers, including Proton, Geely, Chery (for its Tiggo 7 model) and Jaecoo Malaysia (for its J7 SUV),” she adds.

She declined to elaborate, noting that the group is still in the initial stages of discussions.

She adds that Malaysia is Feytech’s largest market, accounting for 97% of FY2023 revenue, while the export markets make up the balance 3%. “At the moment, our expansion overseas is dependent on our customers. For example, we manufacture car seat covers for Mazda’s CX-5 and CX-8 car models that are exported to the Philippines and car seats for Kia’s Carnival and Sorento car models that are shipped to Thailand.”

Go still sees tremendous potential for the group’s growth in Malaysia. “There are many car manufacturing plants here and not all of them are our customers yet, so there is still room to grow,” she says.

News of automotive OEMs rapidly expanding their presence in Southeast Asia and planning to establish new assembly plants in Malaysia presents huge growth opportunities for Feytech.

“As a Tier 1 automotive supplier, once we secure a car seat project, naturally, we will get the car seat cover business. So, if an automotive OEM wants to assemble a car model locally, it will definitely look for seat suppliers first [providing opportunities to local suppliers like Feytech]. We are currently the only company that can do both leather car seat covers and car seats,” says Go.

Last year, Chinese automotive giant Geely revealed plans to make Malaysia its right-hand drive manufacturing hub for the Asean region, with a potential investment of RM32 billion over the next 10 years. Feytech is eyeing a portion of the upcoming projects.

“We want to be ready and have a [manufacturing] plant in the central region to bid for any of these projects,” Go says.

Go, 50, is one of the country’s few female CEOs in the male-dominated automotive manufacturing industry. Her journey to the automotive sector has been an unconventional one. She says, “I started my career [in a job] typically considered by women before moving into the male-dominated automotive manufacturing industry. It was an extreme career change. I was a cabin crew member for 15 years before I left to set up Gosford Leather Trim (S) Pte Ltd (Gosford Singapore) in Singapore in 2007 with my late brother, Go Yoong Fei.”

Go was in charge of overseeing the sale and marketing of car seat covers to the REM market segment in Singapore.

It was tough at the beginning, she recalls, but the period during which she was with Singapore Airlines Ltd (SIA) helped. “The fundamental skill or the core of doing something is still the same. SIA is known for its system — the way they relay their messages to all the crew members based all over the world is remarkable. I was fortunate enough to have a chance to work in such an organised company. In the last six or seven years of my flying days, when I was promoted to leading stewardess, I was in charge of inflight sales, among others. I gained hands-on experience in terms of planning and execution. And every time we fly, we fly with different cabin crew members, hence you have to learn how to handle the person in a very short time.

“So when we manage an organisation of factories, [having a] system is important. I have to communicate with my staff in various plants to have the same goals, to let them understand what the company is doing now, especially the recent corporate exercise where a lot of them are new to this. As a publicly listed company, we now have to take care of shareholders’ interests, there are more regulations to follow and a lot of communication that we have to do within the whole group to let them understand what the difference is between then and now,” she says.

In 2018, Go joined Gosford Leather Industries Sdn Bhd (Gosford Malaysia) when she was identified as the successor to her late brother, Yoong Fei, after he was diagnosed with stage 4 lung cancer.

“The founder of this company was my late brother. I am the eldest of four siblings. Yoong Fei was my second brother,” Go says.

She assumed the role of acting CEO in March 2019, and her role expanded to encompass overseeing the overall activities of Gosford Malaysia, Gosford Singapore, Trimex Automotive (Aus) Pty Ltd, Trimex Distribution (M) Sdn Bhd and Feytech Sdn Bhd. Go stepped into the CEO’s role in April 2019, after her brother passed away at the age of 43.

She was joined by her sister-in-law Tan Sun Sun and brother Go Yoong Chang, who are the executive directors of Feytech. “Yoong Chang is responsible for the business development of the group’s OEM market segment, mostly dealing with the customers, suppliers and future business partners. My sister-in-law is in charge of overseeing the REM and PDI market segments in Malaysia,” says Go.

Together, the Go family controls 70% of Feytech.

Go says the group is considering acquisitions to bolster its capabilities in the automotive segment and will fund these using internal cash reserves.

“We are always looking at M&A opportunities. If that can create long-term benefits for our shareholders and the group, [we are interested]. But we want control over the potential company,” Go says, adding that the group is open to acquiring companies beyond the car seat and car seat cover businesses. “Our focus is now on growth, not another fundraising.”

The group had a net cash balance of RM16.7 million as at end-March 2024. Its cash and short-term deposits stood at RM43.77 million, while its borrowings totalled RM27.07 million.

Feytech has a fixed dividend policy of paying out at least 40% of net profit each year. “Considering its strong balance sheet and decent cash flow generation, we expect Feytech to distribute 50% of net profit as dividends from FY2024 to FY2026,” says Mercury Securities in a May 7 IPO note.

Feytech’s share price has dropped 9% since its trading debut on May 21. The stock closed at RM1 last Thursday, valuing the group at RM843.2 million with a forward 12-month price-earnings ratio of 13.33 times. 

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