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JEP Holdings: A Beacon In Singapore’s Aviation Industry Part 2
Corporate Digest | 17 April 2014
By: Shane Goh
Articles (99) Profile

Read more about JEP Holdings’ business model and expansion plans here.

Human Capital
In order to keep up with the growth in its aerospace arm, JEP’s personnel are crucial to the success of the firm.

“Due to the demanding requirements in the aerospace environment, exotic materials with high nickel content such as Inconel, Titanium and Stainless Steel are required in the end-products,” shared Soh.

“As these materials possess different characteristic, like high tensile strength, from basic metals, our manpower must be well versed in handling them. Without the appropriate expertise, we could incur unnecessary consumable costs and miss the deadlines set by our customers.”

Soh noted that the team’s know-how has led to delivery and quality assurance which their clients have come to trust.

Their experience, along with a total preventive maintenance programme and strong service support, has reduced replacement cost as their machinery can last for 15 to 20 years.

Apart from the high capital expenditure needed to start a manufacturing facility, essential technical knowledge creates a strong barrier to entry for competitors.

Strong Financial Performance
A leading market share and well-trained human capital have allowed JEP to enjoy a stellar financial performance. From FY09 to FY13, JEP has posted a compound annual growth rate of 9.9 percent in turnover, from $25.2 million to $36.8 million.

When queried on the blip seen in FY11, Koh explained that 2H11 was adversely impacted by Euro-zone crisis and the uncertainty in the global economy.

The weak US dollar had further contributed to the fall in revenue. The following year, sales recovered and income was recorded.

However, as other inputs such as staff and machinery expenses were factored under cost of goods sold in FY11 financials, the year’s gross profit margin was dragged down from 19.6 percent the year before to 4.8 percent.

If we were to omit FY11’s figures, JEP’s gross profit margin for the past five years has ranged from 12.9 percent to 19.6 percent.

Following a repayment of bank loans and finance lease borrowings in FY10, JEP’s debt-to-equity ratio has hovered within a range of 0.04 to 0.22 for the past four years.

“Our healthy financial leverage ratio allows us to pursue business opportunities when they arise,” quipped Koh. “Although we are comfortable with a leverage ratio of 0.50, it is not a target. The deals we undertake must provide sensible economic gains for the firm.”

Koh How Thim, Executive Director, Finance, JEP Holdings

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The strong growth seen in revenue combined with a healthy balance sheet has enabled JEP to reward its shareholders. In FY12, the firm declared its maiden dividend of $0.001 per share followed by two subsequent dividend payments of $0.001 per share each.

“While we aim to grow the company, we need to strike a balance between capital requirements of a company and taking care of our shareholders’ interest,” shared Koh.

Large Orders Unfilled
Statistics from the International Business Times and International Air Transport Association show that approximately 3.1 billion people flew in 2013, surpassing the 3 billion mark for the first time in history.

The figure is expected to grow to 3.3 billion by 2014. This bodes well for the airline industry and ultimately, aircraft manufacturers.

Based on figures from Airbus and Boeing Company, the A320 family has 4,247 orders unfilled while the Boeing 737 series possesses 3,794 orders undelivered as of 31 March 2014.

This represents 41.4 percent and 32.2 percent of the total orders for each aircraft series respectively.

The long-term nature of JEP’s aircraft-related contracts provides earnings visibility for the firm. Coupled with a goal to maintain its dividends in years to come, JEP looks set to be a beacon in Singapore’s aviation industry.

Currently pursuing his Chartered Financial Analyst qualification, Shane provides coverage on the property, consumer and environmental sectors at Shares Investment.

Please click here for more information about this author.


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