Miyoshi signs MOU on JV with China light electric car firm
Singapore
PRECISION engineering firm Miyoshi has signed a memorandum of understanding (MOU) on a joint venture (JV) with Fujian-based light electric car firm Core Power Group.
Subject to various conditions, including executing a definitive agreement, due diligence and various approvals by shareholders and regulatory authorities, Miyoshi will acquire a stake of up to 49 per cent in Core Power (Fujian) New Energy Automobile Co.
The JV with Core Power, or Zhong Ke Dong Li in Chinese, comes after Miyoshi has been putting in place plans to enter the light electric vehicle industry for the past year.
"Zhong Ke is like a speedboat for us, everything is there. They have land, they have the factory, but don't have the software. We have the software but don't have the hardware," Miyoshi executive chairman and CEO Andrew Sin told The Business Times.
Miyoshi currently makes components for hard disk drives, printers, scanners and photocopiers. It had landed on the Singapore Exchange (SGX) watchlist at the end of 2013 after reporting three consecutive years of losses.
The firm was hit by supply chain disruptions following the 2011 Japanese earthquake-tsunami-nuclear disaster. It was also affected by the Thai floods the same year, which severely damaged its second largest factory.
Miyoshi eked out a S$20,000 profit for its financial year ended Aug 31, 2014. For the nine months till May 31, 2015, the firm recorded a net profit of S$3.4 million.
In July 2014, Miyoshi first entered into an MOU with Hong Kong electric car firm Promise New Energy Development to set up a JV. The two partners subsequently formed light electric vehicle maker Green Galaxy, which Miyoshi owns 55 per cent of.
Mr Sin said the vehicles are an environmentally friendly, cheaper alternative to cars or even established electric vehicles. There is strong demand coming from third and fourth-tier cities in China, he said.
However, the industry currently operates in a regulatory grey area.
Over the past year, Green Galaxy was exploring plans to rent land and an operational facility in China. It has started hiring a sales team.
It was conducting site visits of existing light electric car makers like Core Power before the current opportunity came along, Mr Sin said.
He said the owner of Core Power is a property developer that is investing in a potentially fast-growing area, but is facing operational issues.
"Our partner was impressed by our sales team, market knowledge and regional reach," he said.
Miyoshi ended trading 32 per cent or 1.7 Singapore cents higher at S$0.07 on Monday.
