Crest to ride road less travelled

PETALING JAYA: Crest Builder Holdings Bhd is taking the road less travelled as the niche construction firm bids for some RM3 billion worth of private and public jobs in the country in the current fiscal year.

The move is deemed crucial as the company aims to secure a higher value of projects to boost annual revenue growth by at least a tenth.

Crest executive director Eric Yong Shang Ming said the builder was eyeing areas with “less projects, competition and players” such as flood mitigation and water treatment plant jobs, on top of its staple undertakings in real estate construction.

“I want to look at double-digit percentage (revenue) growth every year and we have started bidding for some of these jobs.

“We’d rather go for something that is a bit more untouched,” Yong told The Edge Financial Daily in an interview.

Crest hopes to secure some RM500 million of the RM3 billion worth of construction projects it plans to tender for. The RM500 million is two-thirds more than the builder’s previous annual target of RM300 million.

Of great interest is Crest’s potential venture into the water-concession business by virtue of its involvement in water facilities. Yong said the company would consider the idea if the price was right, and the terms and conditions fair.

As a building contractor, Crest undertakes construction projects for private property development firms. It is also involved in a wider scope of government jobs, including education facilities, offices and utilities.

Last year, Crest secured about RM320 million worth of property construction projects on prime land in Kuala Lumpur.

In December, the firm clinched from Exceljade Sdn Bhd a RM175.5 million contract to undertake super-structure works for two towers of 40-storey serviced apartments in Jalan Tun Razak and Jalan Raja Muda Abdul Aziz.

A month earlier, Crest was awarded by Khor Joo Saik Sdn Bhd a RM145.3 million project involving super-structure works for a 35-storey office tower in Jalan Ampang.  

Should Crest decide to export its expertise abroad, Yong said the company preferred joint ventures (JV) with major local players which had already established their presence overseas.

The risk is deemed lower compared with collaborations with foreign entities, or direct tenders by the company itself.

“We are slowly exploring,” Yong said when asked whether talks were ongoing with any local firms for a JV abroad.

At present, Crest’s revenue is derived entirely from Malaysia. Construction income constitutes over 90% of its top line.  

The builder currently has a construction orderbook of around RM1.5 billion while unbilled sales from its building projects stand at some RM1 billion, which is expected sustain the group’s earnings till the middle of the financial year (FY) ending Dec 31, 2012, according to Yong.

Unbilled sales refer to the value of construction jobs undertaken which have yet to be recognised in a company’s  books.

Meanwhile, Crest foresees more work for its property development division against the backdrop of a recovery in the local property market.

Yong said Crest planned to launch some RM350 million worth of properties in FY2010, more than triple the RM100 million unveiled in the previous year.

The launches include two mixed development projects in the Klang Valley — phase 5 of its Alam Idaman job in Shah Alam and in Damansara Perdana.

For FY2010, the company aims to achieve some RM210 million worth of real estate sales, accounting for 60% of the RM350 million worth of launches targeted for the year.

Crest’s current unbilled real estate sales stand at some RM60 million which could sustain earnings for the next  two quarters, according to Yong.

The developer’s landbank of about 16ha are located in the Klang Valley — in Shah Alam, Kelana Jaya, Damansara Perdana and Mont’Kiara.

Yong had said in 2008 that Crest intended to develop more commercial properties in the Klang Valley to boost recurring rental income, a move which may eventually prompt the company to set up a real estate investment trust.

Recurrent income from commercial real estate leases, or potential water concessions, is deemed important to safeguard against cyclical income from construction and property development.

Yong had also said that Crest hoped to expand abroad, possibly into Singapore and Vietnam besides Middle East countries such as Qatar and Oman.

Based on its closing price of 76.5 sen last Friday, the stock is trading at a price-to-earnings ratio (PER) of 7.1 times and price-to-book ratio of 0.43 time. The industry’s average PER stands at 9.94 times, according to Bloomberg data.

The counter has declined 1.92% so far this year compared with the FBM KLCI’s 1.59% advance.

Two analysts have a buy call on the stock, one an outperform and another a neutral, with target prices of between 78 sen and 92 sen.

This article appeared in The Edge Financial Daily, Jan 11, 2010.

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