Mikro MSC looks overseas for growth

SHAH ALAM: Home-grown electrical equipment manufacturer Mikro MSC Bhd is aiming to grow its overseas business, which currently contributes 41% to its total revenue, to offset slowing growth locally.

“I don’t think there is (room for) growth in Malaysia ... if we can break even, it is already very lucky for us,” its managing director Yim Yuen Wah told SunBiz in an interview recently.

“But I think there is a lot more room to grow in the overseas market. So going forward, we will be focusing more in the area. We are trying to enter (more) European markets,” he added.

Yim said currently about 60% of Mikro’s business is in Malaysia, although the group is exporting its products to more than 20 countries including China, India, Vietnam, Singapore and Hong Kong.

He said Mikro’s key overseas markets include Vietnam, India, Indonesia and Bangladesh, with Vietnam accounting for 30% of the group’s overseas business.

“Vietnam was the first country that we exported to. We have been there for 15 years already. Whereas our market (share) in other countries is much more smaller, with some less than 1%. So we hope to grow them further, especially in Indonesia, where we see good potential to grow, but we need more time,” Yim noted.

According to the group’s annual report ended June 30, 2016 (FY16), it has been seeing a compound annual growth rate of 20.7% in its overseas sales since 2012.

For FY16, its sales in overseas market comprised 41.3% or RM19.9 million of its total revenue, compared with 37% or RM14.4 million in the previous year.

Yim said the group plans to come up with a better marketing approach for its key overseas market to expand the customer base, noting that the group allocates more than RM1 million every year for its marketing activities.

He said Mikro spends between RM1.4 million and RM1.5 million each year on research and development to improve its products.

The group’s products are designed to monitor and prevent damage to electrical equipment by isolating and tripping a circuit breaker when an electrical fault is detected, allowing unaffected parts of the electrical system to continue to operate.

Mikro’s major revenue earners are protective relays, which prevent the electrical system from being damaged in the case of a sudden surge of current or a damaged cable. Yim said there are no plans to expand its range of products at the moment.

Commenting on the impact of the ringgit’s depreciation on its business, Yim said the effect is pretty much balanced, as both sales and purchases of raw materials and equipment are US dollar-denominated.

Asked about the impact of Bank Negara Malaysia’s requirement that exporters retain only up to 25% of their export proceeds, Yim is of the view that the group will experience foreign exchange losses.

“It’s going to be difficult, but what can we do, it is compulsory. For us, maybe we need about 40% (of direct conversion from US dollar to ringgit). That (40%) is enough for us, because we buy equipment in dollars,” he added.