Monkey Investor

Key takeaways of our update with Success Transformer Corporation Berhad (STC MK, NR):

♦️ Backlog of orders to last until 2QFY22. Due to the implementation of the FMCO in June, the group has a backlog of orders, which are expected to be completely fulfilled by December. Meanwhile, the group is looking at increasing orders, as some dealers have resumed operations in September.

♦️ Expect more aggressive tender bids ahead. The group is currently involved in bidding for many tenders. Domestically, Malaysia intends to reduce its economy-wide carbon intensity (against GDP) by 45% in 2030, vs 2005 levels. This is anticipated to drive more tenders ahead. Moreover, STC’s transformer and lighting products are green products.

♦️ Transition of demand from high-intensity discharge (HID) to light-emitting diode (LED) and smart lighting. The current conversion from HID to LED lighting is driven by energy-saving and cost-saving benefits. While some municipalities are in the midst of replacing conventional lighting with LED alternatives, some municipalities like Johor Bahru, Selayang and Ipoh are in the process of changing LED lighting to smart lighting.

♦️ Competitive advantage of its Intelligent Lighting Control System (iLCS). The cloud system for STC’s smart lighting product, iLCS, is maintained in Malaysia. This gives it a competitive edge against peers that maintain cloud systems abroad – in countries like Hong Kong and China – as it eliminates the risk of data outbreaks overseas. Additionally, smart lighting eventually will help to garner cost savings, as the system could help to adjust brightness, according to the timer and traffic flow data collected.

♦️ Breakdown of lighting segment: 30% conventional, 70% LED lighting

♦️ Product distribution channel. This depends on the size of the project. For those worth over MYR5m, such jobs tend to be directly awarded to STC. Otherwise, projects would mostly be obtained through contractors/dealers.

♦️ Achieved 100% vaccination for all staff and the group is running at a 70% utilisation rate (pre-pandemic: c.100%).

RHB Research

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