MTQ Corp Mar – Sept 09 Change (compared to Mar-Sept 08)


$39.77 m -12%
Net profit $7.18 m 3%
Net gain in fair value of available-for-sale financial assets $6.21 m  
Interim dividend 1 cent/share -
Net asset value 82 cents 26.7% (compared to Mar 31)
Earnings per share 8.16 cents 7.4%
Annualised PE (based on stock price of 74 cents) 4.5X  

MTQ Corporation yesterday announced a $7.18 million net profit (up 3%) for the half year ended Sept 30.

Its total comprehensive income came up to $16.47 million (up 331%), boosted largely by fair value gains in its investments in equities of some listed companies.

The subject that grabbed attention at a briefing for analysts that MTQ hosted was something else, though.

It's a new deal with a
 potentially huge boost to the company's sales in the next financial year.

MTQ announced yesterday that its Australian subsidiary had secured a partnership with Robert Bosch Australia to distribute the full range of Bosch automotive products (such as brake linings and windscreen wipers) to the aftermarket in Australia.

(For Bosch's list of auto products, click here)

MTQ's Aussie subsidiary, MTQ Engine Systems (Aust), has nine branches in the key cities of Australia, which will stock up on the Bosch automotive products, sell and deliver them to motor workshops.

Kuah Kok Kim, MTQ chairman. File photo by Sim Kih

This deal, effective Nov 1, is attractive to MTQ for the following reasons:

* Top-seller: Bosch is the No.1 brand in the aftermarket for automotive parts in Australia (and globally). Bosch's sales figures, however, were not available but are sizeable.

As MTQ put it in its press release: “The group expects the turnover of the Australian business to increase substantially in the near future.”

MTQ’s Australian business accounted for 49% of the group’s total revenue of $39.77 million in the six months ended Sept 30.

* Minimal capex: MTQ does not need to spend heavy capex to distribute the Bosch products.

In fact, Mr Kuah Kok Kim, the chairman of MTQ, estimated that the capex would be only $200,000 -$300,000 for upgrading MTQ’s computer system, adding phone lines, and increasing shelf and warehouse space.

* Cross-selling: MTQ’s existing engine systems business in Australia is expected to be boosted by the new customers that its Bosch business will serve.
A MTQ branch in Australia, which will deal in Bosch after-market auto products.

The pool of new Bosch customers for MTQ numbers 2,500, which is double MTQ’s existing customers in Australia, said Mr Kuah. Being from the same auto industry, the existing and new customers could result in higher sales for the existing line of products - such as turbochargers - offered by the engine systems division.

“We hope the existing engine systems division will enjoy higher sales as we will now have more customers, more relationships,” Mr Kuah explained.

Prior to its partnership with MTQ, Bosch supplied its products from Brisbane to the aftermarket all over Australia - an arrangement that did not satisfactorily meet its customers' expectations.

It also had a few distributors with limited channels, which are expected to now co-exist with MTQ’s network.

At yesterday's briefing, some analysts asked for an update on MTQ's greenfield project in Bahrain, where MTQ intends to serve the oil exploration businesses. Mr Kuah said work was on track and operations could start at the end of next year.

For the full MTQ press release on the Bosch deal, click here

For more on the Bahrain project, read our recent story: MTQ: Investing US$20 m in Bahrain venture

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