IPO Review - MAP Technology (Part 2)

(1) Business of the 3 main subsidiaries (revised):

(a) Min Aik Precision
Principal Activity - Precision Stamping - VCM Plates (main product)
Operations - China
Main Customers - Maxtor (20%) and Western Digital (80%) for FY06
Revenue Contribution - 22%

(b) M&J Technologies
Principal Activity - EMS Solutions - EHDD (main product)
Operations - Thailand
Main Customers - Western Digital and Latronix (in Nov 06; Reputable customer but too new to determine sustainability and significance)
Revenue Contribution - 66%

(c) Art Craft
Principal Activity - Die-cut components
Operations - Singapore
Main Customers - BMS Tech, Metalform, etc whose end customer is Western Digital
Revenue Contribution - 6%

Conclusion: Company is highly dependent on Western Digital for its Revenue; If for whatever reasons it loses WD as customer, its revenue will be adversely affected.

(2) EMS Solutions
The Company employs 696 full time production operators and 530 subcontract workers - Is this normal?

(3) Utilisation Rates (FY06)

(a) Precision stamping - 44.7%
Q: What are the Company's plans for the under-utilised maunfacturing facilities since the focus moving forward is clearly EMS solutions

(b) EMS - 49%
Q: Why does the company still need to spend $8.2 million (of net proceeds) on expansion when it is under-utilized?

(c) Die-cut - 98.9%
Efficient!; But sadly, this is a low revenue contributor.

(4) R&D
The company mentions that R&D is an essential part of the precision stamping business - So why is none of the proceeds spent on R&D?

(5) Credit policy
Allowance for doubtful receivables increased from $17K in FY05 to $63K in FY06, but no bad debts have been written off in FY06; The company gives bad estimates for doubtful receivables

(6) Customers
Min Aik Technology (a controlling shareholder) contributes 76% and 45% to FY04 and FY05 Revenue respectively. This decreased to 22.3% in FY06 with Western Digital accounting for the Company's FY06 Revenue.
Q: What do the revenue figures become if we remove Min Aik Tech's contribution?

(7) Strategic M&A
Form the Prospectus, it does not seem that the Company is certain of any JVs or M&As, so why is $7.8M (of the net proceeds) being set aside for it?