Mainboard-listed stainless steel group AnnAik has bought a controlling stake in a surgical and cleanroom equipment supplier, diversifying into a business which is burgeoning from a growing need for stringent contamination controls.
This will provide a more stable base of income in the current high-cost steel market, said AnnAik CEO Tan Choon Huat yesterday.
AnnAik supplies stainless steel – mainly Grades 304 and 316 – to the construction of high-value industrial assets in industries such as the pharmaceutical and semiconductor sectors.
Grade 304 steel billots currently cost about US$2,000 per tonne, while Grade 316 is priced at some US$3,400. These prices, Mr Tan said, are over 50 per cent higher than in the third quarter last year.
He does not expect the high steel price situation to change much over the next 6-12 months, estimating at most a 5 per cent shift either way.
AnnAik posted net earnings of $2.4 million for the six months ended June 30, up 30 per cent from the previous corresponding period. This was achieved on the back of a 33 per cent rise in revenue to $24 million, due mainly to strong demand from Japan and China, and rising stainless steel prices.
AnnAik said yesterday that it would pay $720,000 for 600,000 shares of Megatech Scientific Pte Ltd, whose business Mr Tan hopes will treble over the next three years with better support from a bigger company.
Premium Capital Asia, a private company owned by Mr Tan and AnnAik executive chairman Ow Chin Seng, will also take up 150,000 shares at $1.20 apiece. The vendor is Megatech founder and managing director Chiam Kia Chee.
Mr Tan said: ‘It may seem like an entirely different business from our current one but it has great potential to grow and does provide synergies because we share similar clients in the pharmaceutical and semiconductor sectors.’