Analysts believe palm oil mill boiler maker Boilermech stands to gain from strong demand from overseas market, on the back of its venture into biogas and water treatment in Kuching.
KUCHING: Analysts believe palm oil mill boiler maker Boilermech Holdings Bhd (Boilermech) stands to gain from strong demand from overseas market, on the back of its venture into biogas and water treatment in Kuching.
According to researchers at JF Apex Securities Bhd (JF Apex Research), most of Boilermech’s revenues were generally derived from Malaysia and Indonesia.
In order to reduce the reliance on these traditional markets, the Group expanded their bio-energy segment’s reach to Thailand, Cambodia, Philippines, Africa, Papua New Guinea and South America.
“This resulted in improvement of revenue from other countries from 16.2 per cent in 2016 to 62.7 per cent in 2017,” it said in a note.
“We foresee revenues from these countries to continue increasing in 2018 and 2019 as we believe the group will put in a concerted effort to execute marketing strategies in these countries.”
Boilermech produces high quality boilers with different types of variants to cater to different customer needs.
The group offers three types of boilers with different graters, namely vibrating grate, reciprocating grate and fixed grate boilers.
Thus, customers can select the boiler type that suits their best needs. Generally, the fixed grate boiler is the most popular type as it renders the most effective and convenient features.
Boilermech also ventured into biogas and water treatment business, as in March 2016 the group ventured into the water treatment business through the acquisition of a 60.2 per cent equity interest in Teknologi Enviro-Kimia (M) Sdn Bhd (TEK), a total water management company based in Kuching, Sarawak.
“Acquiring TEK is a stepping stone for Boilermech as it stands to benefit from Malaysia Palm Oil Board’s (MPOB) requirement for every palm oil mill to have a biogas system.
In conjunction with that, the water treatment division was able to generate revenue and pre-tax profit of RM29 million and RM3.1 million respectively in FY17. However, JF Apex Research warned that MPOB’s requirement may not be fully adopted immediately as the cost to develop the facilities is still high.
“Moving forward, we envisage the group’s revenue and headline net profit could back into a growth trajectory as more oil palm trees coming into mature, not forgetting after-sales services which will continue to brighten the Group’s businesses.
“We expect the group’s top line to grow 7.7 per cent in FY18F and 10.1 per cent for FY19F as well as rising bottom line by 9.7 and 10.1 per cent in FY18F and FY19F respectively.
“Besides, we also foresee that its water treatment division will continue to generate earnings and secure more contracts following increasing environmental concerns and growing demand for clean water.”
Boilermech was incorporated in 2005 and has produced more than 400 boilers over a decade. Consequently, the Group became a leading player in the palm oil mill boiler industry in the Malaysian and Indonesian markets.
With a strong track record established by the group, Boilermech is able to secure well known bluechip clients such as KLK and IJM Plantation in Malaysia as well as Wilmar International and Musim Mas Group in Indonesia.
“We estimate the group’s market share currently stands at 50 per cent for Malaysia and 20 to 30 per cent for Indonesia,” JF Apex Research said.