Advancecon sees ‘significant’ earnings growth in FY17

KUALA LUMPUR (June 20): Earthworks and civil engineering firm Advancecon Holdings Bhd, en route to list on the Main Market of Bursa Malaysia on July 10, expects “significant” growth in net profit for the current financial year ending Dec 31, 2017 (FY17) on strong order book.

As at May 19, 2017, Advancecon’s order book amounted to RM572.5 million, which will keep the group busy until the end of 2019.

Its chief operating officer Yeo An Thai also sees the group keeping its profit margin between 10% and 12% in FY17, similar to that posted in the past three financial years.

“We hope that our target [for contract wins] this year will exceed at least our turnover,” Yeo told a press conference after the prospectus launch for its upcoming initial public offering (IPO) yesterday.

From Jan 1, 2017 to May 19, 2017, Advancecon had tendered for more than 20 projects with a total value of RM496.4 million, of which the group had secured about RM34.5 million.

The group is looking to raise RM56.7 million through the IPO, which is earmarked for capital expenditure, working capital, to repay borrowings and listing expenses.

The IPO entails a public issue of 90 million new shares, representing 22.4% of its enlarged issued share capital, at an issue price of 63 sen per share. The group will have a dividend policy to distribute a minimum 20% of its net profit.

Yeo said the group is hoping to secure more projects in the future, leveraging on its enlarged balance sheet after the IPO and the recent contract wins of a combined RM345 million for the West Coast Expressway (RM239.8 million) and the Pan Borneo Highway (RM105.2 million) projects.

The two projects were secured at the end of last year, which will take 30 months to complete.

“We are therefore optimistic about attaining more large-scale contracts going forward by leveraging on our enlarged balance sheet after the IPO,” said its chairman Yeoh Chong Keat in his speech at the prospectus launch.

“Furthermore, we have increased our geographical coverage by successfully undertaking numerous earthworks and civil engineering projects nationwide, including the Klang Valley, Negeri Sembilan, Johor, Kedah and Penang in the peninsula, as well as Sarawak,” he added.

Advancecon posted a net profit of RM6.85 million on revenue of RM59.15 million in the first quarter ended March 31, 2017. Its earnings per share stood at 2.2 sen.

In a filing with Bursa Malaysia yesterday, Advancecon said its revenue was mainly derived from the construction and support services business, which accounted for RM59.12 million or 99% of the total revenue. The balance revenue was derived from its property investment segment.

It added that there were no comparative figures for the preceding quarter and preceding year as this is its first interim financial report on the consolidated results for the quarter being announced by the company.

“The outlook of the construction industry remains encouraging as it continues being driven by government-led initiatives and spending, in particular projects such as highways and other public infrastructures. The construction industry in Malaysia will remain a major contributor to our revenue in the current financial year,” it said.

Barring unforeseen circumstances, Advancecon expects the financial performance of the current year to be satisfactory.

This article first appeared in The Edge Financial Daily, on June 20, 2017.

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