Financial Highlights

The following table sets out a summary of the company's combined financial information for the Period Under Review:

• The revenue grew from RM 89 million in FYE 2021 to RM 153 million in FYE 2023, indicating that the company is expanding its market share.
• The gross profit margin fell from 20.35% in FYE 2021 to 19.37% in FYE 2022 due to an increase in the aluminium extrusion costs, which were not fully passed on to customers, but it rose to 19.75% in FYE 2023.
• The PAT margin increased from 2.92% in FYE 2021 to 5.22% in FYE 2023.
• The gearing ratio is 0.77 in FYE 2023, due to an increase in bank borrowings to finance working capital. This may put the company's foundation at risk in the event of unexpected circumstances. (A healthy gearing ratio is between 0.25 and 0.5).

Major customers and suppliers

Major Customers

The company’s top 5 customers for FPE 2024 are as follows:

The company is not dependent on any of its major customers as none of its customers contributed more than 10.00% of its total revenue.

Major Suppliers

The company’s top 5 suppliers for FPE 2024 are as follows:

The company is dependent on its major supplier, Formosa, for the supply of aluminium billets for their aluminium extrusion activities. Formosa has been a supplier of the company for approximately 20 years as at the LPD, offers competitive prices and on good credit terms. In the event Formosa is unable to meet the company’s demand for aluminium billets, they will source from other aluminium billet suppliers.

Industry Overview

Aluminium extrusion is a manufacturing process used to create aluminium products with fixed cross-sectional profiles. The process involves forcing heated aluminium through a die – a shaped opening that gives the resulting extruded material its desired shape. Generally, aluminium billets are heated to a certain high temperature, then pushed or pulled through a die utilising a hydraulic press or ram. The process is highly versatile, enabling the production of complex and intricate shapes with high consistency and precision. Moreover, aluminium extrusion process has a relatively low energy footprint which translates to lower tooling and manufacturing costs. Aluminium's malleability allows it to be easily shaped into various sections without requiring significant energy, and its melting point is considerably lower than that of ordinary steel.

There is a wide variety of intricate aluminium extrusion profile types that can be produced, including intricate designs with varying thicknesses and void spaces to meet diverse application needs and performance-to-weight requirements. The more common type of aluminium extrusion is the hollow beam profile which is simply a variation of the square profile. Aluminium extrusion products have numerous applications across industries, including construction (e.g., window and door frames, guardrails, curtain walls, and other building materials), transportation, renewable energy, and other sectors.

In Malaysia, the aluminium extrusion market falls under the non-ferrous metal products sub-sector within the basic metal products industry. Malaysia’s basic metal products industry is a crucial supplier of the precursor materials essential to various manufacturing segments including engineering goods, construction material, defence, medical equipment, communication devices and scientific equipment, among others. The basic metal products industry covers primary processing and downstream manufacturing of both ferrous (iron and steel) and non-ferrous (e.g. aluminium, tin, copper, zinc, lead) metal products.

According to the Malaysian Industrial Development Authority (“MIDA”), the basic metal industry is transitioning its focus from the construction sector towards higher-end industries such as medical devices, aerospace, oil & gas, advanced engineering, and others. For this purpose, the Malaysian Government is pushing companies within the basic metal industry to produce steel of higher grade and quality to enable them to support higher-end manufacturing activities further up the value chain. Currently, the Sarawak-based Press Metal Aluminium Holdings Berhad is the sole Malaysian company venturing into aluminium smelting in the country. In recent years, the company has increased its capacity and this has generated various business opportunities to many downstream players, including aluminium extrusion manufacturers, to commercialise aluminium-related products for high value-added applications such as E&E, energy storage and aircraft components. Malaysia is endowed with abundant bauxite reserves (estimated at around 170,000,000 tonnes by the U.S. Geological Survey, 2021), a primary raw material for aluminium production, and has strategically developed this resource to become a major producer and exporter of aluminium products. Malaysia is a key producer of aluminium in Southeast Asia, with an estimated smelter production of 980,000 tonnes in 2023. At the same time, Malaysia is also a major trader of aluminium products.

In 2022, Malaysia's aluminium extrusion market grew by 29.4% to approximately RM3.04 billion, driven by post-pandemic recovery, robust construction, manufacturing activity, and elevated aluminium prices, peaking at USD3,538 per tonne in March. However, prices declined due to geopolitical tensions and reduced demand from China. In 2023, market growth slowed to 6.0% (RM3.22 billion) amid weaker global and domestic economies, with aluminium prices dropping 12.6% to USD2,174 by year-end. The aluminium extrusion market is expected to grow by 6%–8% from 2024 to 2028, driven by increasing demand in transportation, renewable energy, and construction sectors. Its versatility and contribution to sustainability and lower carbon emissions enhance its appeal. However, challenges such as competition from substitute materials, economic slowdowns, and price fluctuations remain. Growth will be supported by government initiatives and advancements in aluminium extrusion technology.

The key drivers in this industry:

• Expansion in end-user industries drives demand for aluminium extrusion products
• Positive support from the Malaysian Government
• Technological advancements

The key risks and challenges in this industry:

• Fluctuations in commodity prices may affect the production of aluminium extrusion products
• Competition from substitute materials

Source: Protégé Associates

Future plans and strategies for WINSTAR CAPITAL BERHAD

The company's business strategies and future plans are as follows:

1. Expansion of manufacturing facility​
   • Construction of new manufacturing facilities
   • Purchase of aluminium extrusion lines
2. ​Expansion of extruded aluminium products to be used in the solar PV industry

​

MQ Trader View

Opportunities

1. The company has a comprehensive manufacturing facility
2. The company offers a wide range of products

Risk

1. The company is dependent on its major supplier
2. The company’s operations are labor intensive
3. The company’s business operations are exposed to disruptions in the electricity supply

Click here to continue the IPO - Winstar Capital Berhad (Part 1)

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