EG just keeps growing

AFTER reporting record earnings, you would think EG Industries Bhd would be basking. Instead, the company is expecting even further growth ahead.

The electronic manufacturing services (EMS) player based in Sungai Petani, Kedah, raked in a net profit of RM86.5mil for its financial year 2025 (FY25) ended June 30 with revenue of RM1.4bil.

Those figures marks a year-on-year (y-o-y) net profit growth of 74% and a 22.4% rise in revenue on improved organic growth and favourable foreign exchange movements.

This is a commendable feat for EG Industries which operates within a segment of the technology industry that has relatively low barriers to entry and usually thinner profit margins.

The group, which also has manufacturing facilities in Prachinburi, Thailand, has seen a continuous bottom line growth since FY21 to FY25 with a compounded annual growth rate of 56.5%.

Since the end of 2022 until now, its share price have risen by some 600% to RM1.26 per share at the time of writing.

EG Industries’ group chief executive officer and executive director Datuk Alex Kang says that FY26 will see the group further pivoting towards assembling telecommunication products that typically has higher margins.

This will help it in its pursuit of growth.

“In FY25, we did a lot of consumer items, mainly from the D-brand. But in FY26, we will do a lot more telecom products such as 5G optical modules, network switches for data centres etc.

“As telecom products increase and consumer items maintain, the proportion of the former is seen to grow,” Kang tells StarBiz 7.

“In FY25, telecom products made up less than 10% of revenue but in FY26, this will grow to 40% with consumer products making up the rest. Telecom product margins are much better than consumer electronics,” he adds.

Kang says the company benefits from the continued rollout of data centres supported by the rise in demand for artificial intelligence (AI) processes which require more power and network speeds.

“Our financial results will continue to get stronger and stronger in terms of revenue and profits in FY26 from increased contribution of 5G optical modules.

“Previously data was transmitted using wires, but now it is being transmitted with light instead – this is faster.

“This utilises optical modules: linear pluggable optics (LPO) and co-packaged optics which I had expanded into back in 2023,” Kang says.

Now there is demand for these type of products – namely LPO - from the various US and China-based big technology companies which have their own data centres – the US-based Big-G, or the Big-A and social media company Big-M for example.

“They have come to see us wanting to contract to us, wanting to employ our EMS solutions.

“The future is in using LPO for faster data transmissions – which is needed for data processing of photos or files by these AI servers for example. Our FY26 will see a much stronger growth compared to FY25,” he says.

He points to the group’s trend of stronger profit margins – it has grown to 5% in FY24 from 4% in FY23 and 2% in FY22.

Profit margins in FY25 grew further to 6.2%.

This improved performance was due to the increased contribution from these new growth segments.

Kang notes that EG Industries is among the few companies which is doing this in the Asean region, but acknowledges there are competitive pressures from companies in China and Taiwan.

“Many can’t deliver to the United States or China, so most people comes to us,” he says.

Its historical price-to-earnings ratio last stood at 15.64 times, although the company also notes it will in the near future see an enlarged share base due to a planned private placement.

It also has outstanding warrants that have yet to be exercised fully.

“These are in the money now at the current share prices with an expiry in December 2028 – assuming all are converted, it will help us reduce our gearing levels as well.

“If all are converted, we will get an estimated revenue from this exercise of RM400mil,” its group financial controller Karine Goh tells StarBiz 7.

According to its circular, some 225.11 million outstanding warrants 2023/2028 issued by the company are exercisable into about 225.11 million new shares at an exercise price of RM1.80 each.

Pursuant to this exercise and its already announced bonus issuance, the company will see its enlarged share capital grow to 1.386 billion shares under the maximum scenario while gearing is expected to reduce eventually, says Goh.

These additional funds are anticipated to support its expansion over the medium term namely with its new Batu Kawan Smart Factory 4.0, which is dedicated to the assembly of high-power photonics, AI modules and network equipment.

Some of these exercises will also help to reduce its net gearing ratio which last stood at 0.74 times as of June 30, 2025.

“Our capital expenditure needed in the next two to three years is approximately RM500mil to RM600mil, which will be funded via internally generated funds and financing,” Goh says.

Elaborating on its planned private placement, Kang says this will involve some of its clients which will see them emerging as strategic partners in the company.

“We don’t simply give this to anyone. We have identified a few investors but we are still in negotiations on the pricing since we hope to get a higher price.

“We have a certain target till this price target is hit, then we will conduct this private placement. Our placements are all at market prices and is expected to be done in 2026,” Kang says.

“We have got the approval for a maximum 10% private placement from Bursa Malaysia,” he adds.