The development of precision parts maker Sunningdale Tech over the years, in a sense, is a microcosm of the ebb and flow of how manufacturers seize opportunities and how they deal with the challenges of this intricately woven global ecosystem.
While this company may not be the biggest name in the Singapore manufacturing scene, it is led by one of the biggest names in the Singapore business landscape: Koh Boon Hwee, the first local managing director of Hewlett Packard Singapore, and also known, at various points in time, as chairman of Singtel, Singapore Airlines and DBS Group.
Recognising that having dominant shareholding in a small company is no better than a small stake in a bigger and more efficient player, Koh engineered a series of M&As between 2003 and 2005 to form today’s Sunningdale.
As reported in The Edge Singapore’s Issue 148 (Jan 17, 2005), Koh described the merger of Tech Group Asia, which he headed, and Sunningdale Precision Industries as the “best match I’ve come across”, with “a strong strategic fit” that would “unleash synergies in terms of our core competencies”.
The newly created Sunningdale Tech was able to design and make essential plastic components ranging from the smallest of parts in medical instruments to mechanical gears found in printers and even parts that form the interiors of a car.
Koh, as reported in Issue 726 (May 2, 2016), said that no matter how products may change, Sunningdale will play a key role in the global manufacturing sector’s supply chain. “I don’t really care what product you’re going to make. You’re not going to be able to make that product without precision metals, precision plastics, the fundamental electronics. One day, there may be disk drives, and another day there are going to be iPhones, but [companies like Sunningdale] are always going to be around,” said Koh then.
This approach worked fine — until the US started its trade war, and the pandemic broke out. Suppliers like Sunningdale tethered along the global manufacturing chain felt the impact quickly. Preferential treatment was given to “local” over “imported” goods. The long-held idea of a global supply chain stretching across the Pacific seemed particularly vulnerable.
Sunningdale, having a global customer base, was not immune to these developments.
As such, in November 2020, after a few years of Sunningdale’s share price trading largely sideways and reporting hardly exciting earnings, Koh chose to privatise the company.
However, the offer at $1.55 per share was called a “lowball” by some miffed shareholders, given how the book value was already nearly $2 per share. A revised offer, at $1.65, was eventually accepted, and the company delisted on March 8.
Speaking to The Edge Singapore in Issue 970 (Feb 8, 2021), Koh said that because of the new climate, additional “significant” capital expenditure was needed to build new supply bases — especially in high-cost locations such as the US — so that the company can better withstand the trade tensions that persist, even with a new administration.
“This will likely require substantial upfront cash outlays with little near-term payoff, and as a private entity, Sunningdale will have greater flexibility to navigate the shifting landscape market,” said Koh.
Just 10 years ago, customers all wanted to buy from low-cost factories in locations like China. “Well, I will say that today is a little bit different … I think other considerations have crept into the equation [like] resilience and security of supply,” said Koh.
He told Sunningdale’s shareholders at a dialogue on Jan 19: “I can tell you exactly what customers are demanding today: Come to my backyard. Or we might have to find an alternative.”
Similarly, unless Koh decides to tap the capital markets again, investors looking for a bet on manufacturing will have to look for alternatives beyond Sunningdale.
