05 July 2011

SAPIND (7811) - SAPURA INDUSTRIAL BHD - Fundamental Analysis 1 - Business strategy, Segments, Prospect

In this first fundamental analysis of SAPIND (7811), we will focus on the business strategy, business segments and its prospect.
Business Strategy of SAPIND:
"Despite the positive business environment, the Group is aware that we cannot rely purely on market trends to fuel our growth especially given the highly competitive nature of our business. Therefore, we took strategic steps to empower our potential in the three core aspects of our business, namely our commercial, technical and operational capabilities during the year under review."


Sapura Industrial’s Business Strategy:
“Be Competitive: Commercially, Technically and Operationally”.
"The Group’s focus will be on building business scalability with domestic market players. SAPIND is also looking forward to work with leading global players in the local market and are confident that they will be able to appreciate the value that SAPIND can bring to the table in terms of the quality of our products and services."

"SAPIND want to be second to none in the global arena. To achieve this, the Group must improve synergies with the relevant technical partners, especially for product technology. In the long run, this will further enable SAPIND to enhance the attractiveness of Malaysia as a hub for global automotive manufacturers. As such SAPIND will continue working with technical partners from the Asia Pacific region and Euro Zone in order to improve our technical expertise."

"The Group is aware of the need to increase operational efficiencies and capacity utilisation rates in order to reduce cost without compromising on quality. This will allow SAPIND to provide their customers with the best possible value in terms of quality and cost."

Business Segments
Based on SAPIND last 5 years annual reports, Business segments are:
(i) Manufacturing - the manufacture and supply of products for the automotive, electronics and electrical industries and manufacture of butt-weld fittings for oil and gas industries;
(ii) Investment holding - the holding of investments and provision of management services to subsidiaries; and
(iii) Others - trading of autoparts in retail and after sales market, providing computer aided design and manufacture of sub-systems and systems for applications in production and testing and other dormant companies.

From the table above, the core business was manufacturing from 2005 to 2010. However, in 2011, the Investment holding segment contributed around 40% of its total profit. Besides, the profit margin of manufacturing segment increased from 7% (2009) to 11% (2011).  The improvement is in-line with the business strategy of Operationally, that is, increase operational efficiencies and capacity utilisation rates in order to reduce cost without compromising on quality.

Improvement of revenue:
"(1) The improvements were mainly due to the increase in vehicle sales volume as national car makers launched new models. (2)This coupled with the additional components we were contracted to supply during the year under review further boosted our results."

Prospect of the SAPIND
"On this note, we are indeed moving ahead as planned as the year under review saw as make inroads with a new contract from Honda to supply suspension parts. We are currently laying groundwork for this project and will begin work in the first quarter of 2012. We expect our commercial operations to continuously deliver stable revenue and profit from its current long - term contracts." This achievement in line with the first business strategy, Commercially, that is, work with leading global players in the local market.

Rome was not built in one day. After knowing the business strategies, business segments and future prospect 2012 of SAPIND, we will go further to understand the financial condition of SAPIND based on its income statement, balance sheet and cash flow statement.

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Written by: Xaivier Chia


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