Will Ecomate set new benchmark?

READY-to-assemble furniture company Ecomate Holdings Bhd’s foray into the information and communication technology (ICT) solutions industry has raised some questions, chief among which is – will other ­furniture players do the same?

Granted, the export-reliant furniture business is likely to be one of the hardest hit when US President Donald Trump’s 24% tariffs for local exports to the United States come into force after the current “pause” is lifted next month.

But whether or not Main Market-listed Ecomate’s foray into a completely new business is due to this major uncertainty remains unclear. Questions to the Johor-based company were unanswered as at press time.

The company did say on June 6 in an announcement to Bursa Malaysia that the proposed acquisition – a 60% stake in Progressive Computer Systems Sdn Bhd (PCS) from the company’s only shareholder, Law Seng Peng, for RM8.4mil – “represents a strategic opportunity for the group to expand its business operations into the ICT sector and diversify its earnings base.”

The move, Ecomate, adds, is “aligned with the group’s ­ongoing efforts to reduce dependency on its existing businesses in the furniture manufacturing sector”, which, it says “has been experiencing challenges in recent years due to factors such as reduced demand in export markets and deferments of shipments by customers.”

Synergy House Bhd group executive director Teh Yee Luen, who operates within the same competitive furniture industry, says Ecomate ­diversifying into a fresh business “cannot represent the whole furniture industry.”

“I think Ecomate took action because it saw an opportunity for itself. It is a very individual-based decision. Most furniture companies in Malaysia are very focused on their own operations,” he tells StarBiz 7.

Teh acknowledges that most furniture companies do not know what will happen after the 90-day tariff pause is lifted, but businesses will just have to adapt and make the best decision at every juncture, he says.

At a briefing with analysts this week, Teh was quoted as saying that the company had not yet seen any significant decline in demand from the United States, its main market, but there was growing worry among big retailers there, due to the risks and lack of clarity that come with the tariff issues.

More opportunities

Back to Ecomate’s proposal, ex-investment banker Ian Yoong who tracks the furniture industry is undecided on whether it’s a good investment.

“The acquisition of a 60% controlling stake in PCS based on a guaranteed RM3mil profit after tax for financial year ending Feb 28, 2026 (FY26)-FY28 translates to a price earnings ratio (PER) of 4.7 times for this software company.

“The acquisition of PCS at 4.7 times based on the profit guarantee of RM3mil seems reasonable, but is this a good diversification or will it be a ‘diworsefication’? Time will tell.”

He points out that PCS states that it is a multi-award Autodesk partner on its website.

“Channel checks reveal that Autodesk earnings are expected to increase by 50%-60% over the next couple of years, indicating a bright future. Autodesk’s share price has also increased by about 20% over the past 12 months in the United States.”

Yoong also points out that Ecomate’s existing business comprising the manufacture of ready-to-assemble furniture and furniture parts is challenging as per the company’s business performance of FY25, notwithstanding its plan for factory expansion.

Meanwhile, Ecomate in its announcement to Bursa says that it is likely to explore further opportunities for PCS within the ICT segment, if and when, the proposals are completed.

“The board anticipates that PCS will remain profitable in view of the industry outlook and prospects of the ICT sector due to the increasing demand for ICT system integration services, favourable government initiatives aimed at boosting the country’s digital economy, and increasing demand for ICT consultancy services as well as system operations, maintenance and support services.

“This will enable Ecomate to explore further opportunities for PCS in the ICT solutions business.”

In conjunction with the ­company’s proposed acquisition and diversification of its current business, the group has also proposed to undertake a bonus issue of shares and warrants.

All these corporate proposals are subjected to the approval of shareholders and the relevant regulatory authorities.

Shares of Ecomate were trading at RM1.41 apiece at last look, valuing the entire company at RM505mil.

The stock has traded between 84.5 sen and RM1.43 in the last one year.

For FY25, Ecomate made a net profit of RM1.47miil on revenue of RM50.6mil, compared to a net profit of RM1.51mil on sales of RM47.2mil a year earlier.

The company made its debut on the ACE Market in 2021 and completed its transfer of shares to the Main Market of Bursa in July 2023.