Over the past year, nearly 50 companies have launched IPOs on Bursa Malaysia. Each new listing adds to the market’s momentum and encourages investors to pay higher multiples for certain stocks than for similar entities listed on other exchanges.
The Bursa was so attractive that several Singapore-listed companies expressed interest in seeking a listing across the causeway. UMS Integration said so in July, followed by Grand Venture Technology (GVT), which signalled its intention to do the same two months later.
Yet, in an interview with The Edge Singapore, Julian Ng, GVT’s CEO and executive director, tried to downplay the significance of this possible secondary listing. For him, the move ought to be seen as yet another round of fundraising the company has undertaken in its 12-year history.
One of the key rounds was its Singapore IPO on the Singapore Exchange ’s (SGX) Catalist in January 2019, when GVT raised around $13.2 million by selling shares at 27.5 cents each. Another round came just over two years after the IPO in January 2021, where GVT raised around $30 million from Novo Tellus by selling shares at 33 cents each. The investment firm, headed by Loke Wai San, is best known for its multi-bagger bet on semiconductor tester AEM Holdings .
With Novo Tellus on board, GVT’s shares saw steady growth. In a subsequent fundraising round in September 2021, the company raised an additional $28.5 million by issuing shares at $1.14 each. Along the way, GVT also upgraded to the SGX’s mainboard.
However, in-line with the subsequent downturn of the semiconductor industry, GVT’s shares dropped from a peak of $1.33 back in November 2021 to as low as 44 cents in less than a year. Year-to-date, with signs of recovery more visible, GVT shares have gained nearly a fifth year-to-date to close at 63.5 cents on Dec 16, valuing the company at around $214 million.
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With funding already in hand, GVT was able to execute its multi-stage plan to bulk up and gear up. “With all of the funds we’ve raised, plus our own internal operational cash flow, we’ve invested quite heavily ahead of the curve,” Ng says. If it happens, the proposed secondary listing will go towards its broader M&A game plan to bring on additional new capabilities and capacity.
Increasing competitiveness
Originally focused on back-end semiconductor manufacturing, including wire bonding and chip testing, GVT now also offers front-end services, such as metrology and etching — a market said to be ten times larger than the back-end.
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“When we first started, we were a small player, and it wasn’t easy to move into the approved vendor list for the front-end space. But I think in 2020 or 2021, when we broke the $100 million mark in revenue, we were ready to undertake them,” says Ng.
In its 9MFY2024 ended September business update, GVT’s revenue from its semiconductor segment surged by 50.8% y-o-y to $59.5 million. Ng attributes the positive trend to GVT’s ability to stay up-to-date with growth areas continuously. “When we onboard our customers, we will try to understand their product line for various markets, and over the years, we have had quite a variety in terms of our clients’ product range. This year, our growth has been driven by AI-related high-bandwidth memory (HBM) testing, which has led to our increasing competitiveness.”
GVT’s total revenue in 9MFY2024 was up 35.8% y-o-y to $111.9 million, and in an indication of growth gaining pace, 3QFY2024 revenue was up 52.8% y-o-y to $43.5 million. With an improved margin, GVT’s 3QFY2024 earnings were up 51.3% y-o-y to $2 million. GVT also says that earnings would have been higher if not for unfavourable forex and other one-off items.
Despite the strong performance of its semiconductor segment, which accounts for over half of its 9MFY2024 revenue, GVT has long recognised the need to diversify its customer base to better navigate the sector’s cyclical volatility.
To meet its customers’ diverse needs, GVT has expanded its Penang facility from a single factory in 2013 to seven plants today, covering a total manufacturing floor space of 350,000 sq ft. Ng notes that the facility is vertically integrated, offering precision machining, complex 3D shape manufacturing, and mechatronics assembly all under one roof.
Ng adds that since the $17 million acquisition of surface treatment specialist ACP Metal Finishing (ACP) in March, GVT’s Penang facilities have acquired additional capabilities to help it capture more revenue.
While surface treatment is applicable to semiconductors by preventing corrosion in specific components, ACP’s acquisition was made to help grow GVT’s presence in another of its key pillars: the aerospace industry.
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Importantly, ACP is accredited by multiple aviation agencies, including the National Aerospace and Defense Contractors Accreditation Program (NADCAP) and the Federal Aviation Administration (FAA).
GVT entered the aerospace market in 2022 by acquiring J-Dragon, a China-based precision engineering firm, for $12.2 million. This move complemented GVT’s earlier expansion into the life sciences and medical sectors.
The group’s output is used in end products ranging from mass spectrometers, microscopes, surgical microscopes and aerospace landing gears. “We are in the right space with the four verticals we are serving today,” says Ng.
In the 9MFY2024, GVT’s revenue from its electronics, aerospace and medical segment climbed 32.8% y-o-y to $36.1 million as it consolidated revenues from the newly onboarded ACP, signalling that the move was already starting to pay off.
“When we did our acquisition of J-Dragon in 2022, they were mainly a machining services provider to the aerospace industry. But if you want to serve the industry meaningfully, you have to have capabilities beyond this, and ACP adds to that. Today, around 80% of their business is probably geared towards aerospace, original equipment manufacturers, maintenance, repair and overhaul,” says Ng.
Global trade dynamics
As the new year approaches, an increasingly complex geopolitical landscape looms. The impact of the second round of the Donald Trump administration on US-China relations is still uncertain.
Still, Ng is not overly concerned. He notes that GVT’s business model is largely insulated from global trade dynamics. “Our Chinese facilities are still mainly serving the local market, so Chinese for Chinese. Most of our other customers are not Chinese but North American and European MNCs. While they do have facilities in China that serve the Chinese market, they are not actually exporting, so we don’t see a risk to our Chinese operations unless they are doing export.”
GVT also ensured that the new capabilities gained through the acquisitions of ACP and J-Dragon were quickly imparted to other company facilities. This allowed GVT to remove geographical limitations and not be confined to just one site.
The CEO is also focused on positioning GVT as a comprehensive solutions provider in the advanced materials sector, with particular emphasis on bonding alloys and ceramics. In parallel, the company plans to broaden its market presence by opening an office in North America. This plan will enable GVT to collaborate closely with customers, assist in product introductions, and even contribute to shaping product roadmaps. As with all of GVT’s offerings, these advanced material capabilities will be applicable across its diverse verticals, serving clients from a range of industries.
Just recently on Dec 19, the group was selected to supply parts and components for so-called next generation thermal compression bonding (TCB) equipment to a “leading global semiconductor assembly and packaging equipment manufacturer”, with ew opportunities and revenue growth momentum to begin from 2025 onwards.
The customer’s equipment is said by GVT to play a key role in advanced semiconductor packaging of next generation chips, which are to be used in data centres, graphic cards, artificial intelligence (AI) accelerators, mobile application processors and high bandwidth memory (HBM).
GVT, citing tech strategic development firm, Yole Intelligence, says that this advanced packaging market is to grow at a compound annual growth rate (CAGR) of 11% between 2023 and 2029 and will reach US$69.5 billion ($94.6 billion) in 2029.
Additionally, the 2.5D and 3D advanced packaging sector is also projected to maintain a robust CAGR from 2023 to 2029 of 18% to reach US$27.6 billion in 2029.
Looking forward, Ng is optimistic about GVT’s growth over the next five years. Despite a delayed recovery in some segments, the semiconductor industry remains a promising and dynamic sector.
The US authorities may have imposed certain restrictions on the semiconductor industry, but this is still a market worth about US$1 trillion. US funding to help beef up its domestic chip-making capabilities might lead to lower utilisation rates because of new capacity. “But if you look at it from another perspective, state funding could also create plenty of opportunity,” he adds.
Whether or not GVT’s Bursa plans come true, Ng wants investors to know that the company is ahead of the curve and is distinct from many of its peers. He adds: “Rather than just being reactive, we are a bit proactive; we look for innovative ideas to serve our clients better. We have invested quite heavily over the last few years, and we are excited to see all these investments bear fruit for at least the next few years.”
