Tecnic focuses on components, products

KUCHING: Tecnic Group Bhd (Tecnic), despite the weak global and local economy, has achieved strong growth in revenue and profit due to its resilience and its delivering injection molding division.

Netresearch-Asia Sdn Bhd (Inet Research) in its research report said that, Tecnic’s resilience in its new focus on producing higher value products for multinational companies spearheaded its strong performance.

Tecnic provided for an array of industries such as consumer, medical, industrial, oil and gas, automotive and electrical and electronics. As a result, the research house expected Tecnic to grow in tandem for the year 2010.

Tecnic’s injection molding division continued to reap the benefits of focusing on higher value plastic components and products for the automotive, electrical and electronics, industrial and consumer industries.

According to the research report, revenue for the group grew by 25.8 per cent to RM137.5 million from RM109.3 million in the financial year 2008. Tecnic’s injection molding division’s revenue rose by 38.8 per cent from RM82.9 million as of 2008 to RM115.1 million in 2009.

However, the molding making division posted slower growth of 27.6 per cent which rose from RM 17.6 million to RM22.4 million in 2009.

On the other hand, Tecnic’s net profit rose from RM8.6 million as of 2008 to RM12.8 in 2009, which is a 49.1 per cent growth. This was slightly above the research house’s forecast of RM12.0 million.

Moreover, the net profit margin improved from 7.9 per cent of 2008 to 9.3 per cent in 2009. The research report cited the reason to be the on-going effort to focus on higher value product mix and better cost-control.

As a result, the forecasts for 2010 were revised to RM151.8 million. Also the net profit was upgraded from RM13.2 million to RM14.6 million for the year 2010.

Due to higher than expected dividend of 16 sen per share for the year 2009, the stock had a dividend yield of 7.4 per cent. The payout ratio increased from 14.1 to 50.4 per cent from 2008 to 2009 respectively.

As a result, the research house expected a dividend payout ratio of 25 per cent in the current financial year, which translated into dividend per share of nine sen.

The report noted that the company has the ability of a payout of RM3.6 million in the current financial year 2010 based on positive cashflow from operating activities and its net cash position. The company’s target price was pegged at RM2.16 per share.