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JEP Holdings: A Beacon In Singapore’s Aviation Industry Part 1
JEP Holdings has produced two years of profits since FY11. To reward shareholders for their faith in the firm, JEP declared its first-ever dividend in FY12.
In order to get a better understanding,Shares Investment met with the company’s chief executive officer of JEP Precision Engineering, Soh Chee Siong, and executive director, Koh How Thim.
Headquartered in Changi, JEP provides high-precision engineering and manufacturing solutions. At the group level, more than half of its FY13 revenue was derived from the aerospace industry.
The oil and gas (O&G) sector contributed 15.2 percent of its turnover while the semiconductor industry made up the remainder.
Strong Engine Of Growth
When an airline places an order with an aircraft manufacturer, the order is broken down and outsourced to firms such as United Technologies Aerospace Systems (UTAS).
UTAS could invite third-party manufacturers to work on certain portions of the orders. In turn, the third-party manufacturer could further outsource the work. This is where JEP fits into the supply chain.
Airplane engine casing is the prime product of the firm’s aerospace segment. The product houses the CFM56, an engine produced by CFM International.
The CFM56 is used exclusively in the Boeing 737 and Airbus A320 family. Additionally, JEP produces engine casings used by Pratt & Whitney.
“With more than 20 years of experience in the aerospace industry and having established a good reputation, we have become the preferred choice for CFM56 engine casing manufacturing,” commented Soh.
“To our best knowledge, we estimate that we produce 60 percent to 70 percent of worldwide market share of CFM56 engine casing.”
Soh Chee Siong, Chief Executive Officer, JEP Precision Engineering
“Over the years, we have built a reputation for timely delivery of quality products. This has earned the trust of large international aerospace companies like UTAS,” quipped Soh.
“Instead of working with third-party manufacturers alone, we have attracted attention from a few other internationally reputed aerospace companies and started working directly with them. We are optimistic about the future of the aerospace business. We are expecting stronger revenue and better gross profit margin,” added Soh.
Apart from engine casings, other aerospace parts which JEP produces include brake rods and drag braces, used by Boeing 787 and Airbus 350 aircrafts’ landing gear systems.
Additionally, JEP has started manufacturing housings which supports UTAS’s Air Management System for the Boeing 787.
Peripheral Benefit
A physical tour around the firm’s manufacturing facilities uncovered a neat and clean environment.
Soh explained that strict quality standards are placed on the aerospace manufacturing process and that the processes are regularly audited by its customers, both from the aerospace, and O&G industries.
This has resulted in an external benefit. “Our set up not only meets the aerospace quality and delivery requirements, but also meets and exceeds the O&G industry requirements,” noted Soh.
In 2012, JEP’s 85-percent owned subsidiary, JEP Precision Engineering, signed a $13.7 million five-year agreement with Aker Solutions to provide connectors used in underwater oil pipes. This follows a similar five-year contract with Aker which expired in 2012.
Interior of JEP's manufacturing facility in Changi
The company remains proactive in merger and acquisition activities. As part of its expansion strategy, the firm fully acquired Dolphin Engineering in 2012.
“The purchase provided JEP with additional manufacturing capacity and capabilities and enhanced the operations without diversifying away from its core business,” said Koh.
Not one to rest on its laurels, JEP further widened its footprint in Singapore by obtaining a lease to construct a 40,000 square feet manufacturing facility in Loyang Way, next to the premises of Dolphin.
The building and its equipment, estimated to cost $5 million, is expected to be operational in 1Q15. The facility will focus on manufacturing smaller format products.
Going Into Secondary Processing
JEP is going into secondary process with primary focus on Titanium Etch.
“The process, known as Titanium Etch, is a necessary non-destruct test (NDT) to meet manufacturer’s requirements. NDT ensures that the aerospace product is not subjected to machining stress and therefore, meets requirements,” noted Soh.
“With the addition of the process to the operations, the company is poised to enter into the secondary process market which has limited players. If it chooses to expand in this area, the company stands a good chance in further strengthening its revenue and profitability.”
“Presently, the tests are conducted by an external party in Suzhou. With the implementation of NDT in-house, we can provide a one-stop solution to our clients,” said Soh. “This will offer both cost savings and a faster turnaround time.”
Find out about JEP’s financial performance and growth plans here.
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