Proton signs up a 5-year contract with Multi-Code worth RM240 Million

Kuala Lumpur: The second largest Malaysian carmaker Perusahaan Otomobil Nasional Sdn Bhd (Proton) has signed an RM240 Million contract with the car electronic parts manufacturing company Multi-Code Electronics Industries (M) Bhd. As per the contract, Multi-Code will be the primary supplier of all the electronic parts for the national carmaker for the next five years. The Edge Markets reported that this contract has immediately boosted the share price of locally listed Multi-Code by 23.81%.

Proton has been striving quite hard to secure the number one spot in Malaysia, which is currently shadowed by Perodua. The national carmaker follows the philosophy to utilize more local businesses to enhance the economy. So far, Proton has efficiently managed to avoid monetary outflow beyond Malaysia, recording as much as RM200 billion from the sale of four million vehicles in its 30 years of its journey thus contributing RM20 billion in taxes to the government through the sales and service tax.

Talking about Multi-Code, it is a local company which is headquartered in Johor. The electronics parts manufacturing company started its production in the year 1990. The company was started with an initial investment of around RM1.55 million. It Is majorly associated with manufacturing and supply of anti-theft technologies like central locking, alarm systems, and power window regulators. MCE is currently trading into designing, manufacturing and supply of this mechatronics in Malaysia as well as other regional markets of ASEAN segment.

As a part of the contract, MCE will be supplying the national carmaker with parking sensors, power regulators, functional switches, ignition key sets and various other anti-theft alarming devices. According to The Edge Markets, Multi-Code will start delivering these devices to Proton by the start of second and third quarters in this financial year that will end on July 31, 2016.

MCE will be highly benefitted by this deal with Proton, as it was earlier reported that the company incurred a net loss of RM1.07 Million in the Financial Year 2015 with a net revenue of just RM90.03 million. However, in the latest quarter that ended on Oct 31, 2015 (1QFY16), the company accounted a net profit of RM143,000 compared to the net loss of RM1.84 million last year, this rocketed the revenue of company to RM22.41 million moving up by 10.23%.

The main reason of losses incurred by the company was due to low demands from the OEM customers who themselves faced huge fall in sale units due to weakening ringgit and implementation of GST earlier this year.

Image Courtesy: multicode.com &imgur.com