Salcon still on the prowl to broaden revenue base

KUALA LUMPUR: Salcon Bhd will continue to broaden its revenue base, said executive director Datuk Eddy Leong Kok Wah. He said the  group is prepared to venture into new businesses outside of its current three core divisions of water and wastewater engineering, property development and its new joint venture with fibre optic cable layer Volksbahn Technologies Sdn Bhd (VBT).

“We are still pursuing other opportunities. We have to find new sources of revenue to complement our [current] position,” he told reporters after the group’s annual general meeting yesterday.

“[But] we don’t want to be all over [the place] as well. It would be good to focus on just water [and waste water management], but [in] our industry if you look at other water players, they are all into other things [as well],” Leong said.

Salcon’s current net cash stands at RM230 million from the receipt of progress payments from eight out of its nine concessions disposed of to Beijing Enterprises Water Group Ltd last year.

Leong deems the acquisition in VBT as a good investment.

Salcon on May 7 purchased a 50.001% stake in VBT for RM23.5 million, lured by its 15-year concession to build and maintain 108km of fibre optics along the monorail and light rail transit systems for Syarikat Prasarana Negara Bhd.

“VBT will be very exciting going forward, and it could be a new thrust for the group,” he said.

On contributions from the three divisions, Leong said: “Water will [still] be the main thrust initially, but I think property and VBT will come up very strongly and could even match water in the near to medium term. Over time, it may even overwhelm the contribution from water.”

He noted that the water business tends to be cyclical, while opportunities for the other two sectors are “exploding, very exciting.”

Salcon’s water and wastewater division has an order book of about RM900 million, which will keep the group busy for the next three to four years. This includes Phase 1 of the Langat 2 water treatment plant worth RM994 million, in which Salcon has a 36% stake.

Leong said Salcon will recognise income from Phase 1 over the next three years, but the “big chunk” will come in next year. He said the project is expected to bring in “a little more” than 8% to 10% of net margins.

On the second phase of Langat 2, he said the group is keen to participate in it as well.

“I think they [the government] have to do it [award] soon, within a year. So we have to work even faster.”

Leong pointed out that Phase 2 will fetch close to RM800 million and above in contract value.

“We ourselves are also currently tendering for RM2.7 billion worth of contracts, both locally and internationally,” he said, noting that the success rate for its tenders is 20% to 30% traditionally.

Leong is positive that Salcon can secure some good contracts in the coming months. Some jobs of which the group is in the final stages of winning — two to three parties have been short-listed — include a RM250 million job in Sri Lanka and local projects worth RM200 over million.

On the property development front, he said the group hopes to see its joint venture with Eco World Development Sdn Bhd kicking off next year.

This article first appeared in The Edge Financial Daily, on June 27, 2014.

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