Yesterday, Master Tec Group Berhad (MTEC, 0295), a prominent Malaysian cable manufacturing and distribution company, reported impressive quarterly results, with post-tax profits reaching a record high. This performance highlights the company’s excellent cost control and operational efficiency. Before delving into these remarkable results, let's take a brief look at MTEC’s background.

According to the company’s website, MTEC was founded in 2005 and is headquartered in Melaka. The company primarily engages in the manufacturing and distribution of various low voltage wires and cables. Additionally, MTEC is involved in the trading of other types of cables, including medium voltage power cables, fiber optic cables, and solar direct current power cables.

To provide some context, in the wire and cable industry, the largest cost component is raw materials, primarily copper and aluminum. Given that copper is more expensive than aluminum, aluminum-core cables generally offer higher profit margins than copper-core cables.

As per the 2023 annual report, MTEC's primary revenue source is its manufacturing business, accounting for approximately 94.57% of total income. Low voltage cables are the largest revenue contributor, with copper-core low voltage cables making up around 51.04% of revenue and aluminum-core cables contributing about 40.21%. The company currently has an annual production capacity of 9,500 tons, comprising 4,000 tons of copper-core cables and 5,500 tons of aluminum-core cables. The remainder of MTEC’s revenue comes from its cable and wire trading business.

With over 17 years of industry experience, MTEC has become one of Malaysia’s leading cable manufacturers and distributors, serving a broad customer base across various sectors, including utilities, renewable energy, real estate development and construction, oil and gas, public transportation/infrastructure, data centers, and telecommunications.

It’s also worth noting that MTEC was listed on the ACE Market of Bursa Malaysia on January 29 this year.

Revenue Comparison (YoY N/A, QoQ +8.49%)

Since MTEC has been publicly listed for less than a year, there is no data available for year-over-year comparison.

For the quarter ending June 30, 2024, the company’s revenue was approximately RM72.85 million, up about 8.49% from the previous quarter’s RM67.15 million. This increase is primarily attributed to the rise in revenue from low voltage cables.

The quarterly report indicates that revenue from low-voltage cables amounted to around RM60.01 million, accounting for 94.73% of total revenue. Of this, approximately RM46.15 million came from copper-core low-voltage cables, while RM22.86 million was generated from aluminum-core cables.

On the other hand, the distribution business contributed about RM1.10 million in revenue for the quarter.

Net Profit Comparison (YoY N/A, QoQ +74.48%)

Driven by strong revenue growth, MTEC achieved a net profit of approximately RM8.70 million, an increase of RM3.72 million or 74.48% compared to the previous quarter. Additionally, the increase in profitability was supported by a significant reduction in administrative expenses, which decreased by approximately 98.88% quarter-on-quarter to around RM38,000.00. This sharp decline was mainly due to a one-time listing expense of approximately RM2.11 million in the previous quarter.

It is worth mentioning that MTEC is a net cash company. As of this quarter, the company holds approximately RM66.73 million in cash, while its borrowings stand at around RM44.18 million.

The company has declared an interim dividend of RM0.0039 per share, with the ex-date set for September 12, 2024, and payment scheduled for September 27, 2024.

Outlook

The demand for power cables is closely linked to national industrial and infrastructure expenditure. Under the 12th Malaysia Plan (2021-2025), the government will continue to invest in power generation facilities and strengthen the transmission and distribution network to ensure the efficiency and reliability of Malaysia’s electricity supply. Undoubtedly, this will drive future revenue growth for MTEC.

Finally, what are your thoughts on the future prospects of the power cable manufacturing industry, dear readers?

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Disclaimer: The above is purely for educational purposes and reflects personal opinions. It does not constitute any buying or selling recommendations.

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