Ooi Leng Chooi

KUALA LUMPUR (Sept 5): It may be rather surprising that Fajarbaru Builder Group Bhd’s contribution from its construction division — the group’s core unit — has been on a decline since the financial year ended June 30, 2013 (FY13).

Nonetheless, its non-executive director Ooi Leng Chooi reiterates that construction activities remain the group’s core business, although property development and timber are currently contributing a large bulk of its profit.

Although the group is in diversification mode, Ooi noted that the construction division will remain its core business, considering the slew of urban development and infrastructure construction activities in the country, the group is expected to get a slice of the action moving forward.

“In Malaysia, the overall outlook for the construction sector is still very positive. For the Malaysian economy to boom, the construction and property development businesses are needed. And for that very reason, we will actively compete for new projects,” Ooi said.

“We will continue to tender for construction projects. But you see, jobs coming from the property development side will be passed on to our construction arm and [will] keep it busy for years to come,” he told The Edge Financial Daily.

Furthermore, Ooi pointed out that the group’s property development projects would require the expertise and services of the group’s own construction arm.

“We are businessmen and will grab maximum profit for the benefit of our shareholders. Whatever sector we deem attractive and can improve [the] overall bottom line, we will consider entering [it]. But our core business will still be construction and we will continue to capitalise on that,” he explained.

With that, Fajarbaru is hopeful of seeing more positive results from its construction business.

Last month, its group executive director Eric Kuan Khian Leng was quoted by the media as saying that Fajarbaru “has a good chance” of getting its hands on the anticipated 37km light rail transit 3 project which connects Bandar Utama to Klang, and that it had tendered for five contracts under the RM9 billion project, including for the development of a depot, viaduct and stations.

The group received its trackwork machines from China Jiangsu KTK Locomotive and Rolling Stocks Co Ltd and Gemac Engineering Machinery Co Ltd last month.

The machinery is for the rehabilitation of track formation, replacement of ballast and associated works between Jerantut, Pahang and Gua Musang Railway Station, Kelantan (Package B). The RM250 million contract was awarded last year.

“By possessing these machines, this also makes Fajarbaru one of the few private organisations to own such equipment, giving us a significant competitive advantage in the bidding of new construction and maintenance jobs for rail-related projects in the future,” said Kuan.

Fajarbaru’s unbilled order book currently stands at about RM400 million and it is expected to last the group for at least two more years, according to its finance director Charles Tan. Its tender book, which consists of railway, infrastructure and building projects, now stands at about RM4 billion.

In FY17, its annual net profit came in at RM38.79 million, a leap of 261% from the RM10.74 million recorded in FY16, while revenue stood at RM453.32 million, up 7% year-on-year from RM423.91 million.

The property development and timber divisions overtook the construction business in terms of revenue and pre-tax profit.

The logging and timber trading business clocked in pre-tax profit of RM79.95 million and revenue of RM124.37 million, while the property development side generated a pre-tax profit of RM52.71 million and RM202.75 million in revenue. The construction segment, meanwhile, booked in a pre-tax loss of RM1.55 million, on revenue of RM130.46 million.

The construction segment saw declining pre-tax profits between FY13 and FY15, before slipping into the red in FY16. In FY13, pre-tax profit from the division stood at RM6.23 million before declining to RM6.05 million and RM4.66 million in FY14 and FY15 respectively. It posted a pre-tax loss of RM8.69 million in FY16.

“We have had bad results for the past two years but the most recent one [FY17] was much better thanks to the timber and property businesses. These segments made our bottom line figures much better than before,” Ooi commented.

Fajarbaru said in its fourth quarter financial report that the timber segment will “continue to generate significant contributions to the group’s revenue, on the back of stable average prices of timber products”.

As for property development, Ooi said while property prices are unlikely to decrease going forward, the market will never fall short of demand and supply, and that location is key to the segment’s growth.

“Looking at past trends, prices go up, [will] be stagnant, before going up again. They will not go down. Then again, demand and supply will always be there. And if you have good locations, buyers will still queue up for your products,” he said.

Fajarbaru entered property development six years ago and launched its maiden overseas condominium project, the Gardenhill, in Melbourne, Australia in 2015.

Currently, Fajarbaru has about 228 acres (92.27ha) of land in Malaysia: The biggest parcel, measuring 218 acres, is in Port Dickson, whereas the remaining 6.7 acres is in Puchong and 3.2 acres is in Melaka.

This article first appeared in The Edge Financial Daily, on Sept 5, 2017.

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