Saturday, January 23

Timely to double down on SCIB’s Sarawak play

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KUCHING: With a rich historical record of supplying industrialised building systems (IBS) and precast products to key jobs in Sarawak, Sarawak Consolidated Industries Bhd’s (SCIB) new strategy to establish themselves as a contractor in Sarawak is extremely timely as it is ahead of Sarawak’s 2021 state elections which would be held latest by September 2021.

Drawing experience from the 2016 state elections, researchers with Kenanga Investment Bank Bhd (Kenanga Research) noted that the quantum of state budget allocations (from 2012 to 2016) gradually built up to the highest in the election year itself.

“We are convinced that 2021 state budget would likely be a record budget – higher than 2019’s record of RM11.9 billion, providing huge contracting opportunities for SCIB,” it said in a corproate outlook on the company yesterday.

Amongst key mega projects within the state are the Coastal road, Second Trunk Road, Sabah-Sarawak Link Road and the Sarawak Water Grid programme.

Currently, SCIB’s order-book stands at RM1 billion, with the company targeting to reach more than RM1.5 billion by the end of its financial year 2020 (FY20).

“With most of its jobs being short-term in nature (less than teo years), we are anticipating a strong second half of FY20 as earnings recognitions kick in via the progression of jobs at hand,” Kenanga Research continued.

“Dissecting SCIB’s contracts award, we noticed that the jobs are mostly civil or property development-related, with fairly low complexity in terms of job scope.

“Nonetheless, we believe these jobs could provide SCIB the opportunity to establishing a track record in the target markets, before gradually transitioning to more complex jobs in the future after having successfully established its early track record in key markets.

“Construction aside, SCIB is the largest precast concrete and IBS manufacturer in East Malaysia, operating three integrated factories based in Sarawak with a total annual capacity of 500k tonnes.

“Owning a manufacturing arm for the prefabrication materials, the vertical integration gives SCIB an added advantage when tendering for jobs. This also protects project margins for SCIB, as they can source prefabrication materials in-house rather than externally – enhancing their competitiveness for projects tenders.”

SCIB also continues to gain from its overseas markets, Kenanga Research said, with one key target market being the Middle East, having already secured some contracts in Qatar and Oman. Outside the Middle East, SCIB is also targeting Indonesia.

“In Qatar, one biggest catalyst would be the World Cup 2022, where the state has been reportedly spending US$500 million per week on capital projects,” it added. “In total, the state is expected to spend US$200 billion in preparation for 2022.

“This is on top of other surrounding infrastructures, such as residential and commercial areas, roads, airports and hospitals to accommodate the global sporting event.

“While most of the direct tenders related to the World Cup event have already been awarded out, SCIB could still participate in sub-bids and other private-sector developments that are being pushed in tandem of 2022,” it opined.

Meanwhile for Oman, the sleepy port town of Duqm has been gazetted as a special economic zone. The state has the ambitions of making the town one of the largest economic projects in the Middle East and in the world, with a generous land space of 2,000 square kilometres.

Currently, a slew of Chinese firms have already poured in billions worth of investments into the region, seeing this as a greater extension of the Belt and Road initiative.

Closer to home, the relocation of its capital from Jakarta to East Kalimantan is reported to cost a total of US$33 billion in new developments.

“With East Kalimantan being also in the Borneo islands and in close proximity of Sarawak, SCIB could also gain a somewhat geographical advantage in new opportunities there,” it concluded.