Grand Venture Tech sets big targets after sterling results

Singapore

SHOULD an opportunity to acquire a firm specialising in advance materials come by, precision manufacturing company Grand Venture Technology (GVT) is not going to say no.

This follows 2 similar acquisitions - sheet metal manufacturer Formach from Malaysia and Suzhou-based aerospace, medical and semiconductor parts manufacturer J-Dragon - the mainboard-listed company made last year to beef up its capabilities in those fields.

"We aren't stopping here of course because other than an organic growth in terms of capability, we are looking at M&A (mergers and acquisitions) in terms of areas in advanced materials. If a target comes on board, we could take on that," Julian Ng, chief executive of GVT, told The Business Times.

"Other than just being able to handle the material, we want to be able to compound our own material, eventually being able to own our own intellectual property in this space," he said.

Examples include ceramics and quartz, which he said are still at a very early stage of adoption.

Ng's vision for advanced materials is part of the company's 5-year roadmap, which also includes building up mechatronics assembly capabilities and a continued transformation towards Industry 4.0, focusing on areas such as artificial intelligence, machine learning and additive manufacturing.

GVT is also looking into possible expansions overseas not limited to Asia. Other than Singapore, the firm has operations in Malaysia and China, while a majority of its customers are in Europe and the United States.

During the interview, Ng and his teammates - executive chairman Ricky Lee and chief financial officer Robby Sucipto, whom Ng affectionately called "brothers" - exuded much optimism for the firm's future, their mood also lifted by last year's stellar performance.

For the financial year ended Dec 31, 2021, net profit more than tripled to S$17.43 million, from S$5.36 million the year before, the company reported on Feb 15. Revenue rose 89.3 per cent to S$116.3 million over the same period.

Impressive result

It's an impressive result, considering the onslaught of Covid-19 and its bevy of disruptions throughout the year; it's also a result that probably makes the trio feel vindicated after a fairly lukewarm reception to their initial public offering (IPO) launched on the Catalist board in January 2019.

Together with an interim dividend paid out in September last year, the company has declared a total dividend of 1 cent per share for FY2021.

Looking back, Lee conceded that early 2019 may not have been the best timing to launch an IPO, with the world caught in the thick of a trade war between the US and China.

"A lot of people asked me, are you sure you want to carry on? I told my team I think we should carry on. The timing, actually we don't know what will happen tomorrow... So no matter how tough it is, I tell my team, we have to go and face it," Lee said.

Still, he said he had warned his key investors that returns will take time. "If today you want to invest in our company, minimum you have to stay another 2-3 years. If you just want to buy a stock, I think you better not invest in this company," he said.

But as one of the better performing manufacturing stocks in 2021, GVT's potential was perhaps well noticed, and by end-November, the company had its listing transferred to the Singapore Exchange's mainboard.

Since then the market has started taking the company more seriously, said Sucipto, adding that the company has much to gain from the market visibility and credit standing.

"There were certainly many more investors contacting us directly to get to know us, including institutional funds that were not bothered with us before... International bankers are much more keen to partner us and to be looking into our facilities for us to expand internationally," he said.

Recalling the circumstances around its IPO, Ng said: "We were deploying our resources quite efficiently at that time, in terms of our capacity, anticipating the ways semiconductor would have given us a boost in 2019-2020. But not to this level because I think part of it is driven by the pandemic."

The global semiconductor shortage, which started in 2020, is still ongoing, driven by a surge in demand for computer parts during the pandemic alongside the development of new technologies such as 5G and Internet of Things.

Star performer

Semiconductors comprise 71.1 per cent of GVT's sales in FY2021, raking in some S$82.7 million. In the previous year, semiconductor sales brought in S$42.2 million although this was 68.7 per cent of all sales.

The second largest sales segment is life sciences, which brought in S$18.4 million or 15.8 per cent of all sales. Revenue from electronics, medical and others was 13.1 per cent of overall sales at S$15.2 million.

But GVT isn't about to put all its eggs in one basket, as it looks to capture more markets.

One of GVT's value propositions is its ability to produce ultra precise parts for devices such as surgical microscopes and mass spectrometers that are difficult to procure in this part of the world.

Ng said GVT sees a "very big potential" in the medical diagnostics and medical imaging market in China, amid growing interest in healthcare among the middle and upper middle class in second- and third-tier cities, and this also explains why the company acquired J-Dragon last year.

The firm also made a call on expanding its aerospace manufacturing capabilities with the acquisition of J-Dragon at a time when air travel was beaten to a near-standstill by the pandemic.

Ng said the timing was right, especially now that air travel is on the cusp of reopening on a wider scale.

Sucipto added: "When we acquired during that period of time, the valuation was much more reasonable and fair for us to enter. If not, we would have probably had to pay a much higher premium."

Other than seizing the opportunities Covid-19 brought, GVT also had to deal with the disruptions the pandemic threw at them.

Fortunately for the trio, the company was considered an essential service provider and was thus never shut down completely.

There was an outlay with buying Covid-19 test kits and paying for vaccination for the staff, but a more enduring theme for the company is perhaps the trio's come-what-may attitude.

Nimble player

"Along the way, some of our suppliers got shut down because of cases in their factory. How we manage it is we just have to move to another, look for another supplier, work with them our capacity and continue to operate in this way, just that we have to be flexible in terms of moving the parts between Singapore, Penang or China," Ng said.

For FY2022, Ng is optimistic about a "good year" across all segments, owing to the strong demand, but this outlook is at the same time moderated by the risk of a worsening pandemic as well as the Russia-Ukraine war.

Explaining the company's growth drivers, Sucipto said the company is trying to pivot its capabilities in life sciences - the ultra precision, sub-micro-machining, advanced materials - to the front end, a market size that is up to 10 times larger than the back end, where it is predominantly.

Lee said: "There's a long way to go. I always tell my team we are the new player, and we are still a very small player. So, we shouldn't think we are very successful because of some small success. We are very far away."