While many investors are worried that the recession in US will worsen and affect consumer spending in 2008, MAP Technology (MAP) begs to differ. It has just announced its FY07 results which was impressive for a technology company. MAP is an integrated data storage service provider involved in manufacture & sale of precision stamping products, provision of EMS solutions and manufacture & sale of die-cut components. It is a subsidiary of Taiwan-listed Min Aik Technology (Min Aik).

STERLING FY07 RESULTS

MAP’s earnings for FY07 rose triple-digit to $9m as opposed to $3.7m in FY06 on the back of 87.4% revenue increase. This was due to broad-based growth within all its 3 business segments. Revenue from its EMS solutions segment more than doubled due to increased orders from existing customers. The management has proposed a final tax-free dividend of $0.025 which represents a payout of approximately 60% of net profit, above the 35% mentioned in its listing prospectus. MAP’s CEO Robert Chia claimed that the earnings could have been better if not for the full tax provisions in Thailand (15%) and Taiwan (20%).

For FY07, production capacity at its precision stamping facility was 90%, up from 55% in 1H07. Last year, MAP invested in HDDiskFlix, a California start-up developing unique and innovative products in the area of direct internet- to-HDTV (High Definition TV) devices. This was seen as a move to foray into the HDTV market in the future. Notably, MAP is the exclusive supplier of key HDD products to HDDiskFlix.

SYNERGY WITH JTIC

MAP recently announced that it has entered into a sale and purchase agreement with Jurong Technologies Industrial Corporation (JTIC) to acquire 7 companies from JTIC for $26.3m. The payment will be made via issuance of 65.75m new shares valued at $0.40 apiece by MAP to JTIC. The companies being acquired are involved in precision plastic injection moulding, mould design & fabrication and EMS solutions. Their manufacturing and other facilities are located in Singapore, Malaysia and Suzhou, PRC. The client portfolio is broad-based with focus in the medical, wireless and other non-HDD industries. JTIC agreed to provide a profit guarantee of not less than $5.2m for FY08 and should the profit guarantee not meet that requirement, MAP will adjust the shares issued according to the valuation of the acquisition.

JTIC has also given an undertaking to continue to purchase from the acquired companies, an amount not less than the total purchased for FY07, subjected to competitive quotes on an armslength basis for 3 years once the acquisition is completed. Chia expects the new acquisitions to contribute 30-40% profit into MAP’s earnings and help diversify its customer and product base while establishing a foothold in PRC. JTIC President & CEO Cheang Chee Ming believes that the tie-up is a win-win situation for both parties and would provide JTIC entry into the growing HDD industry.

LOOKING FORWARD

Chia has a track record of turning Min Aik from a $6m company to a $600m company during his charge and he has already set targets for the 3 newly acquired companies’ general managers from JTIC. MAP has also just signed contracts to produce automotive parts in 2Q08 for one of the world’s leading automotive components supplier after 2 years of courtship. Furthermore, MAP will also look for more strategic M & A opportunities in related businesses to broaden its income stream. The move to diversify its operations will certainly help it in the long run as MAP plans for its future.