With the entry of the new shareholder, SCIB has successfully secured five EPCC contracts worth RM175 million to be completed in 2020.
KUCHING: Following the emergence of its new largest shareholder as well as a new management team back in October 2019, Sarawak Consolidated Industries Bhd (SCIB) is looking to expand its business outside of precast concrete manufacturing and into engineering, manufacturing, construction and commissioning (EMCC).
This comes as SCIB’s new biggest shareholder, Datuk Dr IR Mohd Abdul Karim Abdullah and its new management team led by Rosland Othman have a proven track record in the Middle East region via another public listed company, Serba Dinamik Holdings Bhd.
Starting in early 2019, Karim started to accumulate SCIB shares. On May 2019, Karim emerged as one of substantial shareholders after he acquired 19 million shares or 22.5 per cent of SCIB.
He triggered a conditional mandatory general offer (MGO) for the group after he raised his stake to 42.8 per cent in August 2019 at RM1.10 per share and stated his intention to keep its listing status.
Post-MGO, Karim and Rosland collectively have a 55 per cent stake in SCIB.
Karim is the founder and group managing director/chief executive officer of Serba Dinamik while Rosland was the senior vice president for special projects and business development unit at Serba Dinamik.
“We believe their vast experience in the Middle East will be positive for SCIB. This can be seen with two recent engineering, procurement, construction and commissioning (EPCC) projects that SCIB has secured in the region worth RM103 million,” observed analysts at AllianceDBS Research Sdn Bhd (AllianceDBS Research).
Following the emergence of its new largest shareholder, SCIB is looking to expand its business outside of precast concrete manufacturing and into EMCC. Prior to that, its civil construction business was relatively small with earnings mainly from its manufacturing business – supplying precast concrete and Industrialised Building System (IBS) products in Sarawak.
With the entry of the new shareholder, SCIB has successfully secured five EPCC contracts worth RM175 million to be completed in 2020.
Three of the contracts are from overseas markets in Indonesia, Qatar and Oman. SCIB is planning to achieve an order book target of RM1.5 billion by the end of this year with high exposure in the international market.
Meanwhile, SCIB’s precast concrete/manufacturing business has been resilient with revenue steadily increasing from RM57 million in FY16 to RM76 million in FY18. The research firm expect sales to remain solid underpinned by increasing demand for building materials in Sarawak.
“This is supported with an expected increase in construction activities mainly from mega infrastructure projects such as Second Trunk Road (RM1.5 billion), Coastal Road (RM1.2 billion) and others projects under the Regional Corridor Development Authority (RM1.1 billion).”
SCIB remains the largest precast concrete and IBS manufacturer in Sarawak. It has four factories in Sarawak with a combined capacity of 500,000 metric tonnes at a utilisation rate of about 5 per cent.
If the group is able to secure more construction projects in West Malaysia, AllianceDBS Research believed it could set up a precast plant with an estimated capital expenditure (capex) of RM15 to RM20 million.
“On the back of an impressive start, we pencil in RM500 million and RM800 million of new jobs in FY20 and FY21 respectively,” AllianceDBS Research targeted. “Assuming a profit before tax margin of nine per cent, this would boost SCIB’s core net profit to RM34 million and RM48 million in FY20 and FY21 respectively from FY19F of RM0.2 million.”