GPA open to new ventures in hope of returning to black

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KUALA LUMPUR: After consecutive losses in the past three financial years, automotive batteries manufacturer GPA Holdings Bhd, in which Tan Sri Robert Tan Hua Choon owns 23.26%, hopes to return to profitability in the current financial year ending March 2015 (FY15). It plans to focus on the non-auto segment while working to improve its internal cost structure.  Chairman Eddie Tan Han Chuan said GPA is also open to new businesses beyond automotive in its search for new  revenue streams.

“We will look at various opportunities, which could include non-auto businesses,” he told reporters after the group annual general meeting last week.

“We should return to profitability in this financial year (FY15),” said GPA financial controller Lee Chin Wee.

In its non-auto segment, GPA looks to boost the valve regulated lead acid (VRLA) batteries business which has seen double-digit sales growth in the past few years.

The auto batteries segment contributed 57% to group revenue in FY14, while turnover in the VRLA batteries segment made up the remaining 43%; that year, the group incurred a net loss of RM7.9 million on revenue of RM150.9 million.

Tan  hopes GPA’s foray into a new business venture involving the trading of used motor vehicles — via its wholly-owned subsidiary Hasrat Mestika Sdn Bhd — will contribute positively to the group’s earnings in FY15. “[This new segment] has nothing to do with battery production. Operations had begun already and despite being an “infant” business that the company is taking on, it will positively contribute.”

GPA expects this new income stream to complement its existing manufacturing income stream and has included in its business plan to venture into trading various automotive parts and ancillaries, according to its filing with Bursa Malaysia on Aug 27. For the first quarter ended June 30, 2014 of FY15, GPA reported a net loss of RM881,000, 10 times the net loss of RM80,000 it saw in the previous corresponding quarter, while revenue slid to RM39.01 million from RM39.16 million.

Executive director David Lai said the group now exports 50% of its volume for the VRLA segment. “There is currently a slow migration from conventional batteries to maintenance-free (MF) batteries. For MF batteries, we are taking it on an OEM (original equipment manufacturer) basis where we need to be MF-capable in our own facilities.”

Lai said the group has allocated “a few millions” to automate processes and to make its facility “MF-capable”. GPA’s production line is now running at 70% to 80% of capacity.

GPA closed up 0.5 sen or 4.17% to 12.5 sen last Friday, giving it a market capitalisation of RM98.05 million.

This article first appeared in The Edge Financial Daily, on September 29, 2014.