The new piece of land will house the group’s new 200,000 sq ft operational facility, an increase of 152,600 sq ft

By S BIRRUNTHA

GREATECH Technology Bhd’s move to buy a plot of land in Batu Kawan near its existing operations to support its expansion plans has been viewed positively as it will also help lower its operating costs.

Public Investment Bank Bhd in a research note yesterday stated that it is optimistic on Greatech’s long-term prospects, given its unique exposure to the photovoltaic and electric-vehicle sectors.

“We believe the recent run-up in its share price, which is up by 52% since our initiation of coverage on Oct 12, 2020, has priced in its near-term positives.

With a mere upside of 3%, we downgrade our recommendation on Greatech to ‘Neutral’ with an unchanged target price of RM5.35 post bonus,” it stated.

Greatech entered into a sales and purchase agreement with Penang Development Corp on Jan 13 for the acquisition of a piece of vacant leasehold land, measuring 5.9 acres (2.38ha) in Batu Kawan, Seberang Perai, Penang.

The acquisition was done through its wholly-owned subsidiary, Greatech Integration (M) Sdn Bhd (GIM), for a cash consideration of RM13.37 million. The purchase will be funded through internally generated funds, its exchange filing revealed.

The new piece of land will house the group’s new 200,000 sq ft operational facility, which will accommodate its manufacturing operations relocated from Kulim, Kedah, as well as to serve Greatech’s future expansion.

The new facility is expected to have a built-up area of 200,000 sq ft, which is an increase of 152,600 sq ft compared to the built-up area GIM currently has from its five rented premises in Lunas of 47,400 sq ft.

With the increase in built-up area, Greatech said the new facility will significantly increase its capacity to cater for future orders.

Greatech’s filing noted that the plot of land is nearby to its head office in Bayan Lepas and assembly plant in Batu Kawan, complementing its business operations due to its proximity and the group’s ability to consolidate its operations and management. This will help reduce its annual rental commitment by RM320,000.

“The construction of the new operational facility on the land plot is expected to commence by the end of the first quarter of 2021 (1Q21), subject to the approval of planning permission and building plans from the relevant authorities.

“The physical construction is expected to be completed by the end of 2021,” Greatech said in a statement.

The purchase is subject to the approval of the Penang state authority to transfer the land from Penang Development Corp to GIM.

Nevertheless, the group is expecting the physical construction to be completed by the end of 2021.

GIM’s manufacturing operations are currently located on rented premises in Lunas, Kulim, with a total expected rental of RM323,000 to be incurred for the financial year ending Dec 31, 2021.

For its 3Q20, Greatech’s net profit rose 79.58% to RM23.22 million from a year ago, as it enjoyed a strong demand for its solutions and products.

Revenue for the quarter grew 59% year-on-year to RM75.82 million from RM47.67 million recorded in the same period last year.

At close yesterday, Greatech’s share price ended 9.27% or 48 sen higher at RM5.66, valuing the company at RM7.09 billion.