This article first appeared in The Edge Malaysia Weekly on September 16, 2024 - September 22, 2024

Greatech Technology Bhd (KL:GREATEC) clinched The Edge Billion Ringgit Club (BRC) award for the highest return on equity (ROE) over three years in the technology sector this year, a back-to-back win after taking home its first BRC award last year.

During the BRC awards evaluation period (between FY2020 and FY2023), Greatech’s weighted ROE averaged 27.2%. This was the highest in the technology sector, attesting to the company’s ability to make good use of its shareholders’ capital to generate exceptional earnings.

From FY2020 to FY2023, the systems integrator specialist in industrial automation for the solar and electric vehicle (EV) industries saw its total revenue jump about 2.5 times to RM658.75 million in 2023 from RM261.13 million in 2020, boosted by its key solar customers which went through a large-scale capital investment programme at the end of 2021.

Coming a long way in just five years, Greatech’s market capitalisation has soared 16.6 times to RM6.35 billion from just RM382 million when it listed on the ACE Market in June 2019.

It is worth noting that two of Greatech’s key customers are based in the US and made up about 75% of its total revenue in FY2023.

Greatech’s ability to manoeuvre its manpower to focus on its key customers’ imminent capital expenditure plans, coupled with its competitive cost structure that enabled strong pricing advantages, has allowed the company to enjoy industry-leading operating margins of 25% to 37% in previous years, during which its profit after tax rose 1.76 times to RM154.36 million in FY2023 from RM87.85 million in FY2020. On top of the strong operating momentum, the company also has little borrowings.

Greatech envisions promising long-term growth prospects, propelled by ambitious climate targets and widespread decarbonisation initiatives led by the US and other governments around the world.

“As the world increasingly embraces sustainability, the group is strategically positioned to contribute to and capitalise on the evolving landscape of renewable energy. The group’s production line systems (PLS) play a pivotal role in reducing the costs associated with generating renewable energy,” the company said in its 2023 annual report.

According to the minutes of its recent general meeting, Greatech’s management highlighted that the recent US-China tariff hikes will be advantageous to the company, especially in the EV and solar industries, and may allow the company to seize more opportunities. Its CEO is confident about the company’s growth trend and has guided a year-on-year revenue growth of 25% to 30% for FY2024. The company also revealed that it delivered four standalone equipment to a hydrogen car company in 2023, when it was conducting hydrogen testing in its facilities.

As for its life sciences division, Greatech has made further inroads via the acquisition of Ireland-based Allied Automation Ltd, a specialised automated equipment maker for the medical device and life sciences industry with 25 years of experience.

“With Ireland’s renowned expertise in medtech and research, we are positive that our substantial investment in this new venture will generate significantly greater synergy, propelling our global growth in delivering customised automated solutions,” said the company.

At end-2023, Greatech revealed an ambitious order book target of RM1.1 billion for FY2024, representing a 38% increase over its 2023 target of RM800 million, which hinges on its optimism for its EV and life sciences segments.

The company’s outstanding order book as at May 2024 stood at RM1.01 billion, with solar contributing about 60% of the total followed by e-mobility (26%), life sciences (12%) and semiconductor automation (2%). This gives it order visibility until the first half of 2025.

Greatech’s new state of the art, 500,000 sq ft Batu Kawan Plant 4 (BK IV) was fully operational in May this year.

At the time of writing, most investment analysts were positive on the group’s prospects. Seven out of ten of those tracking Greatech had a “hold” recommendation on the stock while three had a “buy”. Their target prices ranged from HSBC Research’s RM4.80 to AmInvestment Bank’s RM6.53, with an average of RM6.05.

In July, the company announced a one-for-one bonus issue to reward existing shareholders and encourage trading liquidity of its shares. This is its second bonus issue since 2021.

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