KUALA LUMPUR (July 4): Engineering support services provider Edelteq Holdings Bhd (KL:EDELTEQ) is expanding into the upstream semiconductor segment with a proposed 24% stake buy in Solid Point Precision Manufacturing Sdn Bhd for RM20.74 million, using a mix of cash and shares.

Edelteq said the deal will see the company acquire a 6.72% stake in Solid Point Precision from Singapore-based LIPO Precision Industry Pte Ltd for RM5.81 million in cash, and subscribe for a 17.28% stake via the issuance of new shares in Solid Point for RM14.93 million, according to its filing with Bursa Malaysia on Friday. 

Solid Point Precision is involved in the manufacturing of precision machining components and parts for the semiconductor industry, Edelteq said. It operates in the upstream segment of the semiconductor supply chain, supplying components used in integrated circuit assembly, testing, and equipment manufacturing.

"While the precision manufacturing activities of Solid Point Precision align with the group's broader strategic objectives, they will not form part of the group's consolidated operating activities," Edelteq said. 

Edelteq sees the investment as a strategic step towards vertical integration. By getting precision parts directly from Solid Point, it can rely less on outside suppliers, cut costs in its chip and test (C&T) segment, and boost profit margins.

"By procuring precision parts from Solid Point, Edelteq is able to achieve cost savings within its C&T segment, which will contribute to improved profit margins," it said, adding that Edelteq will gain a competitive advantage in terms of product pricing.

For the financial year ended Dec 31, 2024, Solid Point Precision’s net profit jumped more than 3.5 times to RM10.19 million, while revenue nearly doubled as demand from key customers rebounded following a semiconductor sector slowdown in the preceding year.

Edelteq said the investment is expected to be completed in the second half of 2025, pending shareholder approval. Once approved, the diversification will begin immediately.

The RM20.73 million cost will be paid using internal funds and/or bank loans, with the final funding plan to be decided by the board after getting all necessary approvals.

Shares in Edelteq closed unchanged at 28 sen on Friday, valuing the company at RM149.11 million. Year to date, the counter has fallen more than 15%.