Malaysia-based AGX Singapore carves niche in aerospace logistics

When an Airbus A330 plane had to make an emergency landing in Perth in 2017 due to a mid-flight engine failure, time was of the essence as several aircraft on-ground (AOG) logistics companies sprung into action to get the plane up and running.

They arranged for the necessary parts and engines to be flown in from Xiamen in China, Paris and the United States within just 48 hours. The airport maintenance team quickly went to work, and soon the plane was ready to take to the skies again.

Such unexpected incidents are big business for logistics companies, not least due to their fat margins of up to 35 per cent due to this specialised segment.

One of them that’s tapping this niche in Southeast Asia is integrated logistics solutions provider AGX Singapore, a subsidiary of Malaysia-based AGX Group.

Mark Penu, the executive director and managing director of AGX Singapore, reckoned that the AOG segment will continue to grow, led by rising air traffic on the back of robust tourism and e-commerce activities, and greater demand for maintenance, repair and overhaul services.

“AOG logistics services are critical for the aerospace industry, as every minute a plane sits on the tarmac means money lost for airline operators,” he told The Business Times.
 

A growing segment

The AOG logistics market in the Asia-Pacific region is expected to reach US$13.3 billion (S$17.96 billion) this year and will reach US$19.3 billion (S$26.07 billion) by 2030, with a compound annual growth rate (CAGR) of 6.4 per cent, according to Mordor Intelligence.

Established in 2004, AGX Group listed on Bursa Malaysia’s Ace market in February this year. This market is a sponsor-driven market designed for companies with growth prospects.

Last year, AGX Group posted annual revenue of RM186.8 million (S$53.6 million), with 38 per cent coming from the aerospace logistics segment, which handles the AOG service.

The group’s revenue is primarily driven by sea and air freight forwarding services, which account for just over half (52 per cent) of total revenue.

The remainder is generated from a range of other services, including warehouse management, third-party logistics services, and road freight transportation.
 

AGX Group

Source: AGX Group

Currently, AGX Group provides AOG logistics services in Malaysia, the Philippines and Singapore to clients located in different parts of Southeast Asia.

While there are global competitors in places such as Dubai and London, Southeast Asian countries are gaining traction due to more robust tourism activities and the fact that more companies employing a China+1 strategy, said Penu.

He noted that the increasing adoption of the China+1 diversification strategy has prompted many companies to seek alternative manufacturing destinations outside China, with Southeast Asia being a preferred choice.

Malaysia, which is a hub for electronic and electrical manufacturing, stands to benefit from this, and this puts AGX in an advantageous position, he added.
 

Tapping Johor’s proximity

Currently, AGX Singapore contributes around 11 per cent, or RM15.8 million (S$4.54 million), to the parent company’s revenue. With the expanding warehousing and aerospace logistics business, Penu expects this contribution to increase significantly.

“If all plans materialise, I believe AGX Singapore will see revenue increase by another 10 to 20 per cent from the previous year,” said the 52-year-old Singaporean, who joined AGX Group in 2010 and set up the Singapore of ce in the same year.

To complement its Singapore operations, AGX established a warehouse in the Port of Tanjung Pelepas in Johor Bahru, just 24 km away from its warehouse in Singapore.

This 35,000-square-foot facility in Johor Bahru allows AGX to double its capacity at reduced costs, saving around 40 per cent on rental and 60 per cent on labour, said Penu.
 

Regional expansion

AGX Group has operated offices in Southeast Asia – in Singapore, the Philippines, Myanmar and Cambodia – and in South Korea since August 2012.

Penu said that increasing market presence is key for AGX Group’s growth as a regional logistics company.

“We are looking at adding another two destinations in the next three years. The countries under consideration are Indonesia, Thailand and Vietnam,” he said.

He singled out Vietnam, with its huge population of 100 million, a young working class, and significant benefits from the China+1 strategy, is a market that is full of potential.

“Thailand also has a large population and many longstanding partners. We are considering joint ventures or independent expansion there,” he added.
 

Source: The Business Times © SPH Media Limited. Permission required for reproduction.