Pecca: Sitting on a Niche, or Ready to Move Up the Value Chain?

Do you drive a Perodua, Proton, or Toyota?

Chances are, you are already an indirect customer of Pecca.

Pecca Group sits behind the scenes making car seat covers, upholstery, and interior trim components for the automotive industry. It does not sell to consumers directly. It sells to the car makers themselves — making it an OEM supplier embedded deep inside Malaysia’s automotive supply chain.

And when you look under the hood of the financials, the numbers are quietly impressive.

The Business: 91% OEM, and Growing

Pecca’s revenue is dominated by one thing: making car seat covers for OEMs. In the latest quarter (Q2 FY2026, ended December 2025), OEM contributed 91.3% of total Group revenue, with Replacement Equipment (REM) at 5.4% and Pre-Delivery Inspection (PDI) at 2.4%.

The automotive segment in Malaysia alone made up 96.3% of quarterly revenue. This is not a diversified conglomerate. It is a focused, niche manufacturer.

Why has Pecca’s revenue kept growing? Because when total car volumes in Malaysia grow, Pecca benefits as a supplier into that ecosystem. It does not need one single brand to dominate — as long as more cars are produced and sold, there is more interior work to be done.

Malaysia’s Total Industry Volume (TIV) hit an all-time high of 820,752 units in 2025, a four-year growth streak. The MAA expects a slight pullback to 790,000 in 2026, but even that is a strong base.

Applying the Durable Compounder Lens

We ran Pecca through the same quality filter we use across our Bursa screening work. The results were striking:

• ROE well above 20% — annualising H1 FY2026 PAT of RM30.9m against equity of RM217m gives a return on equity of roughly 28%
• Free cash flow positive — operating cash flow of RM44.8m in H1, versus just RM4.3m in property and equipment capex
• Net cash position — RM116m in cash and liquid investments against only RM19m in total borrowings

That alone is enough to make quality-focused investors stop and look twice.

What Stood Out: Capital Efficiency

What really stood out is how little capex this business has needed historically. Pecca did not have to keep spending heavily on giant factories or expensive machinery just to keep earnings moving. The total property, plant and equipment on the balance sheet is only RM44m — modest for a manufacturer generating RM125m in half-year revenue.

That partly explains why free cash flow has been strong.

Only more recently do we see capex stepping up. The company is building a second manufacturing facility at UMW High Value Manufacturing Park in Serendah, Selangor, with Phase 1 targeted for completion in H2 2026. This will support the move into complete seat assemblies, aviation, locomotive, and broader interior solutions.

The right-of-use assets on the balance sheet jumped from RM23.5m to RM42.0m in six months — a signal that the capacity expansion is well underway.

Working Capital: The Quiet Strength

Another quiet strength: working capital management. Operating cash flow of RM44.8m in H1 was significantly higher than the RM28.8m in the same period last year. The company saw favourable movements in inventories, receivables, and payables.

This is a big reason why Pecca’s cash flow has looked so solid. It is not just reporting accounting profits — the business has been pretty good at turning those profits into actual cash. For a manufacturer, that is no small thing.

Moving Up the Value Chain

To their credit, the group has been making more visible efforts to expand beyond seat covers. Management has spoken about four growth pillars: OEM, REM, Aviation, and Emerging Ventures.

Here is what the latest quarterly report reveals:

• Full seat assembly — the seat assembly line is being finalised for customer audits, a step up from just making covers to delivering complete seats
• Indonesia expansion — through subsidiary PT Pecca Gemilang Indonesia, pursuing new OEM contracts with H1 revenue up 38% to RM3.6m
• Aviation MRO — cabin interior refurbishment for airlines, helicopters, and private aircraft, expanding into additive manufacturing and in-flight entertainment solutions. Revenue more than tripled to RM1.4m
• REM export markets — Netherlands, Singapore, Ireland, US, Australia, UK, Canada, New Zealand, Middle East, and Europe
• Regulatory expansion — pursuing EASA Design Organisation Approval beyond existing CAAM and EASA Production Organisation Approval, plus regional clearances in Indonesia, Singapore, and Thailand

Geographically, revenue is already diversifying: Malaysia still dominates at 93%, but Rest of Asia (4.1%), Europe (1.7%), and North America (0.8%) are growing.

The Succession Question

The company was founded by Datuk Teoh Hwa Cheng, now around 57. He seems to be thinking ahead on succession, having previously brought in an outsider CEO while getting his two children more hands-on in the business.

But the CEO also left last year. Not much was said publicly, and there does not seem to be a clear replacement yet.

For now, Pecca is still very much a Malaysia automotive story. The Indonesia, aviation, and export initiatives are directionally exciting, but they are tiny relative to the Malaysia OEM core.

All eyes on the second generation: can they widen the moat and execute a real corporate strategy — or will they end up tikam-only when it comes to Pecca’s next phase of growth?

The Balance Sheet Tells a Story

One thing worth noting: Pecca is sitting on a net cash position of roughly RM97m (RM116m cash and liquid investments minus RM19m borrowings). For a company with a market cap in the mid-hundreds of millions, that is a meaningful cash pile.

The company has been paying regular dividends (3.0 sen per share in H1, same as last year) and buying back shares (RM4.1m in H1). The second factory build is being partially financed by a RM10.5m term loan, but the balance sheet has more than enough room to absorb it.

Whether that cash gets deployed wisely — into value-accretive expansion, returned to shareholders, or left sitting idle — is part of the execution question facing the next generation of leadership.

How We Found This

Sang Tikam’s AI scans every Bursa Malaysia filing as it’s published. Pecca’s Q2 FY2026 results were flagged for an unusual combination: high ROE, strong free cash flow conversion, and net cash — rare traits for a manufacturer that most investors have never heard of.

Want to catch filings like this automatically? Try Sang Tikam on Telegram — AI-scored alerts for the announcements that actually matter.