Tesla, Apple supplier Amtek bets car industry will fuel its growth

March 10, 2014 – 9:30 am ET

SINGAPORE (Bloomberg) — Amtek Engineering Ltd., the Singapore-based mostly maker of automobile parts for Tesla Motors Inc. and chargers for Apple Inc. iPhones, ideas to double revenue to $ 2 billion in 5 to 6 years through acquisitions.

The organization, which last week announced it is paying out about $ 210 million for U.S. precision-device maker Interplex Industries Inc., expects automotive merchandise to fuel that growth, CEO Daniel Yeong explained. Automobile businesses will contribute forty % of revenue in the up coming 2 to 3 years, up from 18 % now, he said.

Amtek will seek out far more acquisitions to add to its line of customers, which already includes Dell Inc. and Royal Philips Electronics NV. The Interplex acquire will assist Amtek’s product sales exceed $ 1 billion and offer you scale to win far more contracts with plants in new markets including the United States, Mexico and India.

“After you cross the psychological barrier of $ one billion, the subsequent $ one billion is going to be less difficult,” Yeong, 55, stated in an interview in Singapore on March 6. “In manufacturing, nobody’s going to put all their eggs in one little basket. They’d rather place all their eggs in one particular massive basket.”

Instant entry

In contrast to Amtek, which tends to make bigger parts, Interplex manufactures miniature components for the automotive, industrial and electrical industries, as well as for mobile and health care gadgets. The University Stage, N.Y., company’s customers also contain Apple, as nicely as auto element makers Continental AG and Denso Corp.

The acquisition is “good for them because it extends their services offerings,” explained Loke Chunying, an analyst at UOB Kay Hian Pte who suggests purchasing the stock. “They’re given an immediate entry into Mexico and India, which are amongst the largest markets in the world appropriate now.”

Amtek explained long term growth will also come from enhanced sales from its crucial firms. The next major acquisition is expected soon after 3 years, he stated.

“The very first 3 years will be digesting, doing work to make certain that the 2 businesses perform effectively together,” he said, incorporating that Interplex “checks about 80 percent of my boxes.”

Deal financing

Amtek will almost certainly fund the acquisition through bonds and loans, he stated, ruling out a share sale due to the fact it would dilute existing investors. The borrowings will boost debt to 130 % of equity, up from 30 percent now, CFO Sheila Ng mentioned.

The move into the automotive market will more lower the reliance on challenging disk drives, which was Amtek’s biggest company. Sales to the data storage device industry have fallen to 12 percent of income from as considerably as 30 percent, she explained.

The shrinking disk drive marketplace, which faces competition from mobile units this kind of as tablets, has dragged revenue and profit lower for 2 years. A rebound is probably in the following 2 many years, according to information compiled by Bloomberg.

As opposed to the electronics industry’s 2-12 months solution cycle, automotive contracts generally cover 6 to twelve years of provide needs, the business said.

Amtek might set up new plants in Brazil in a couple of years, drawing on Interplex’s expertise in Mexico, Yeong explained. The Interplex deal will give Amtek 5 factories in the United States, a single in Mexico and 2 in India.

Mexico, which sent fewer than a quarter of a million automobiles across its northern border in 1990, is poised to surpass Japan this 12 months as the No. 2 car exporter to the United States, advisor IHS Automotive estimated. The automotive sector has grown so big that it generates much more foreign exchange than oil or cash sent property by Mexicans residing abroad.

“The mixed Americas such as Latin America is 1 of the most essential continents I’m tackling, which I have zero presence in right now,” Yeong mentioned.

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