Giken Sakata, the precision engineering business, was established in 1979 and subsequently listed in Singapore in February 1993. The listing status was transferred to GSS Energy from February 2015 and Giken Sakata became a wholly-owned operating subsidiary of GSS Energy. The precision engineering division has established itself as an integrated contract manufacturer supplying the consumer electronics, healthcare/medical, gaming, safety equipment, industrial equipment and automotive industries since 1980. The company’s group CEO and executive director is Sydney Yeung Kin Bond.
1. What are some of the key business segments of GSS Energy?
GSS Energy operates across three principal business segments:
The precision engineering (PE) segment remains the cornerstone of GSS Energy’s operations. It involves the production and sale of micro shafts, precision components and assembly mechanisms, serving a wide range of industries. This segment has consistently been the company’s primary revenue generator, driven by sustained demand for high-quality engineering solutions.
The electric mobility (EV) segment focuses on the development and manufacturing of electric motorcycles and battery-packing solutions. By venturing into the EV market, GSS Energy aligns with the global shift towards green technologies and seeks to leverage the increasing demand for sustainable transportation solutions.
The oil and gas exploration segment reflects the company’s investments in associated companies within this sector. These investments enhance diversification and provide additional revenue stability, capitalising on opportunities within an industry known for its cyclical growth potential.
2. Are there any upcoming projects or developments that investors can look forward to?
GSS Energy is undertaking several initiatives that reflect its strategic vision for growth and innovation. One of the company’s key developments is the launch of its EV battery-packing business, scheduled to commence operations in the first half of this year. This initiative not only enhances the company’s footprint in the EV ecosystem but also explores diverse battery applications beyond EVs.
Another noteworthy project is a collaboration between Giken Sakata, a subsidiary of GSS Energy, and Estonia-based 5.0 Robotics. Together, they are co-developing Minifactory, a compact production unit tailored for high-mix, low-volume manufacturing. Leveraging technologies such as robotics, artificial intelligence, IoT, and cutting-edge CNC systems, Minifactory will set a new benchmark for flexibility and efficiency in production.
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Furthermore, the company is actively exploring opportunities in the medical and healthcare sectors, which are known for their robust margins and resilience. These industries represent a path for sustained growth and long-term profitability.
3. Can you share the reasons for the recent full-year losses and how management is working to turn things around?
The company’s recent losses are attributed to a combination of factors. Revenue declined year-on-year, particularly in the mechanisms and microshaft divisions, as demand weakened amidst broader macroeconomic challenges. Additionally, the EV business, still in its nascent stages, has required significant upfront investments that have yet to yield expected revenue growth.
In response, GSS Energy is implementing targeted strategies to address these challenges. The company is enhancing productivity by adopting advanced technologies and upgrading equipment to boost operational efficiency.
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It is also shifting its focus toward higher-margin industries, such as the medical and healthcare sectors. Furthermore, the company is exploring opportunities in non-EV battery-packing applications to diversify its revenue streams.
4. How is the company managing its financial position and liquidity, given rising payables, declining cash and covenant breaches?
The company has implemented a multi-faceted strategy to safeguard its financial position amid ongoing challenges. To manage rising trade and other payables, GSS Energy is streamlining its cost structure, reallocating resources to higher-margin segments, and introducing productivity-enhancing measures. These efforts are underpinned by targeted investments in technology and operational improvements.
The company is also actively engaging with its lenders, negotiating revised loan terms, and ensuring adherence to covenant requirements. It provides banks with regular updates, demonstrating transparency and accountability.
To further strengthen its liquidity position, GSS Energy is exploring alternative funding options, including equity fundraising. The company is also leveraging government grants and initiatives to optimise operations and reduce dependency on debt. Shareholders are kept informed of these measures, ensuring alignment with the company’s long-term financial recovery strategy.
5. How does the rights issue benefit minority shareholders, and does the 71.9% subscription rate affect the company’s plans?
The rights issue, structured as a 9-for-10 offering in October 2023, allowed minority shareholders to preserve or increase their proportional ownership at a discounted price. This initiative aimed to secure funding for critical growth projects, including the expansion of the EV battery business and the company’s diversification into new revenue streams. Part of the proceeds was also used to offset a prior shareholder loan, which had been extended for working capital purposes. This loan was partially applied toward the shareholder’s rights entitlement without requiring an additional cash injection.
Although the subscription rate of 71.9% resulted in a capital raise below the initial target, the proceeds are sufficient to support the company’s strategic initiatives. Management remains confident that these funds will enable GSS Energy to execute its plans and deliver value to shareholders.
6. What are some of the growth strategies that GSS Energy has planned for the coming years?
GSS Energy has outlined a comprehensive growth strategy focused on diversification, innovation, and market expansion. Leveraging its engineering expertise, the company is targeting higher-margin industries, particularly the medical and healthcare sectors.
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In the EV segment, GSS Energy aims to scale production and expand into regional markets. Collaborative ventures, such as the partnership with 5.0 Robotics on the Minifactory project, will drive technological innovation and further strengthen the company’s PE segment.
Additionally, the company is emphasising sustainability by adopting energy-efficient manufacturing practices and exploring opportunities in energy storage solutions.
7. Can you discuss the outlook for your key business segments?
The PE segment remains a key pillar of GSS Energy’s operations. Leveraging its expertise and ongoing innovations, such as the Minifactory, the PE division is well-positioned to expand into new markets, including the medical and healthcare sectors.
The EV business stands to benefit from the global emphasis on sustainability and the growing adoption of electric vehicles across Southeast Asia. However, the EV market poses challenges, including intense competition and the need for substantial investment to establish market presence. To address these challenges, the company is prioritising scalable production and focusing on high-growth regional markets, which will be critical to achieving success in this sector.
8. How does the company mitigate currency risks with operations in multiple countries?
Given its geographically diverse operations, managing currency risks is a vital part of GSS Energy’s financial strategy. The company prioritises natural hedging, aligning revenues and expenses in the same currency wherever possible to mitigate exposure to exchange rate fluctuations.
The company also regularly reviews its financial strategies and closely monitors macroeconomic trends that could influence currency movements. This enables GSS Energy to make timely adjustments to its operations and financial planning, minimising the impact of currency risks on its overall performance.
9. How will the focus on sustainability impact GSS Energy’s outlook? Are there plans to venture into renewables?
Sustainability is an increasingly central element of GSS Energy’s strategy, particularly in its EV segment. By developing and promoting electric motorcycles and battery-packing solutions, the company is actively contributing to the global push to reduce carbon emissions.
Although GSS Energy is not currently involved in renewable energy projects, it is exploring opportunities in energy storage solutions. By prioritising innovative and environmentally friendly technologies, GSS Energy can capitalise on growth opportunities in markets shaped by environmental priorities and regulatory changes.
10. What are the key Environmental, social and governance (ESG) factors material to GSS Energy, and how do they create long-term value?
ESG considerations are integral to GSS Energy’s operational and strategic priorities. On the environmental front, the company is committed to advancing sustainable transportation through its EV segment and implementing energy-efficient manufacturing practices. These reduce the company’s environmental impact and align with global sustainability trends and stakeholder expectations.
Socially, GSS Energy focuses on workplace safety, employee development, and community engagement. From a governance perspective, the company emphasises transparency, ethical business practices, and strict adherence to regulatory standards.
Together, these ESG initiatives enhance the company’s operational resilience and contribute to long-term shareholder value, ensuring alignment with evolving market and investor expectations.
10 in 10 – 10 Questions in 10 Minutes with SGX-listed companies
Designed to be a short read, 10 in 10 provides insights into SGX-listed companies through a series of 10 Q&As with management. Through these Q&As, management will discuss current business objectives, key revenue drivers as well as the industry landscape. Expect to find wide-ranging topics that go beyond usual company financials. This report contains factual commentary from the company’s management and is based on publicly announced information from the company. For more company information, visit www.gssenergy.com.sg
Raphael Lim is an associate director of FinLit and research with the Singapore Exchange Group
