IT'S rollin' good times at Sesdaq-listed Inter-Roller Engineering, which is reaping the fruits of many years of research and development that have made it a market leader in the design and supply of airport baggage handling systems.

The 24-year-old group, which was listed in early 1991 at 65 cents per share, has gone through several ups and downs over the past few years, suffering losses in 1994, 2000, and 2002.

But so far this year, Inter-Roller has notched record profits and sales, after bagging contracts worth $126 million in 2002 - the biggest in its history. And as at end-September this year, its outstanding orders on hand totalled around $94 million.

Inter-Roller's stock, which is usually thinly traded, has been gaining steadily since the start of this year. It had doubled by June this year.

After the group in mid-August reported strong first-half net profits of $3.2 million and declared its first interim dividend of one cent per share or 22.5 per cent of its earnings, the counter sprang to life and surged from 54.5 cents to over 80 cents within a week.

Yesterday, the shares ended one cent lower at 72 cents, but are still holding on to a year-to-date gain of 300 per cent.

The stock has a free float of around 48 per cent based on 74 million shares.

The company, meanwhile, has continued to maintain its earnings momentum and recently posted net profit of $1.55 million in its third quarter, from an $839,000 loss a year ago. Its sales for the nine months to September grew by over 200 per cent to $39.5 million.

Why has Inter-Roller's fortunes changed so dramatically this year? And can the strong profits it is enjoying right now be maintained in the years ahead?

To answer these questions, we need to take a closer look at how the company has evolved, and what its key competitive strengths are.

Inter-Roller started off as a fabricator of conveyor systems, and through the years developed into a provider of solutions that are integrated with mechanical, electronic control, and computer systems.

It now derives more than 90 per cent of its turnover from airport logistics systems, an area which is seeing growth at the moment because of the growing threat of terrorism, which has led airports around the world to step up security measures in their operations and baggage handling systems.

Inter-Roller's main customers are regional airports, including Bangkok's new Suvarnabhumi Airport and airports in China and Australia.

Back home, Changi Airport has awarded Inter-Roller sizable contracts to redevelop and upgrade the baggage systems at its Terminals 1 and 2, and also to develop a new system for its coming Terminal 3.

Though Inter-Roller supplied Changi's existing baggage systems years ago, it had to compete with multi-national companies from Europe and Japan in the bidding for the latest contracts.

While the impression among many is that the designs and the quality of work done by foreign MNCs are always better, Inter-Roller remains unfazed. It is, instead, quietly confident that its lengthy experience and pool of engineering talent in this niche area of baggage handling systems allow it to customise and modify designs while keeping costs down.

And while many of the MNCs that Inter-Roller is up against have scale and well-known brand names, their bids are also often higher because they have to spend more resources to find the right talent to handle the design and customisation aspects of these particular jobs.

Meanwhile, once Inter-Roller has supplied baggage systems for an airport, it is in a good position to take on the upgrading and maintenance work later on, which provides the group with recurring revenue.

Its day-to-day business aside, a lesser-known trait that distinguishes Inter-Roller from many other smaller-cap listed companies in Singapore is the way the company is run.

Its 60-year-old founder Yap Lem has several times attested to the fact that not a single member of his family works in Inter-Roller or sits on its board - an unwritten policy he established from Day One to promote meritocracy within the organisation.

In addition, under the guidance of former banker and corporate veteran Lim Yong Wah, who has been Inter-Roller's chairman for over 10 years, the company has mapped out a vision whereby profits are not its only motive. Instead, Inter-Roller strives to be a living company with strong core values of trust, integrity and respect, and it seeks to promote a sense of ownership among its staff as part of its efforts to retain talent.

This might sound like fluff to some people, but the fact that the average working experience of Inter-Roller's 28 managerial staff is 16 years, and that of its other 130-odd professional staff is 6.5 years is not lost on many. In addition to this, the group also hires another 200 production workers at its plants in Singapore and Malaysia.

《The Business Times》