Engtex eyes 20% of water pipe replacement market

by **Cals** Tue 22 Oct 2013, 11:07

Business & Markets 2013

Written by Surin Murugiah of theedgemalaysia.com

Tuesday, 22 October 2013 10:30

KUALA LUMPUR: Ductile water pipe manufacturer Engtex Group Bhd is eyeing 20% of the replacement and new markets in the country’s estimated RM5 billion water pipe industry.

Engtex group managing director Datuk Ng Hook said it is no secret the water distribution infrastructure has reached a “red flag” level.

“Non-revenue water, due mainly to leakage, averaged 37% in 2011, with some states recording even more than 50%, such as Pahang, Sabah, Perlis and Kelantan.

“In fact, almost half of the water service complaints were largely due to burst pipes and leakage,” he told The Edge Financial Daily in an email interview.

Ng said Malaysia’s pipe replacement market is worth an estimated RM5 billion, based on the replacement value of old asbestos cement (AC) pipes throughout the country. “Apart from pipe replacement, Malaysia also sees a strong growth in new pipelines, estimated to be 6,000km to 7,000km per annum. This would give a further catalyst of up to RM800 million worth of pipes per annum.”

Ng said the estimates are based on the assumption that only 50% of the replaced and new pipes are mild steel (MS) and ductile iron (DI) pipes, both of which Engtex manufactures. Engtex currently is among the top three leading pipe manufacturers in the country.

Ng said as Engtex is not a civil engineer contractor, the company is not handling any pipe laying projects directly. But as a manufacturer and supplier of MS and DI pipes, it could work with contractors that win such water infrastructure projects from the government.

Ng said Engtex will remain focused on being an integrated one-stop pipeline systems provider, with well-established manufacturing and distribution arms, mainly catering for the water and sewerage, infrastructure and construction sectors.

He said the manufacturing division contributes 53% of the company’s revenue, followed by wholesale and distribution (41%) and property development (6%). For 2012 financial year ended Dec 31 (FY12), Engtek reported a net profit of RM29.15 million on revenue of RM920.5 million.

“Over the last 10 years, Engtex has fine-tuned its business model to move up the value chain, with the objective of enhancing our profit margins. Today, more than half of our revenue comes from manufacturing, compared with 38% 10 years ago when we were focused on trading.

“Going forward, we will continue to enlarge our revenue base through manufacturing,” Ng said.

He said contribution from Singapore’s business was mainly derived from the export sales of DI pipes, which made up RM4.5 million or 8.8% of revenue for FY12. Wire mesh contributed RM21.7 million or 7.9% of revenue.

“We understand the Singapore government is aiming to expand the NEWater capacity to 55% to meet future demand by 2060, from 30% currently. Thus, we are hoping to participate in the tenders for more pipe orders in Singapore,” Ng said.

He said regionally, the company exports its DI pipes and wire mesh to Singapore, New Zealand, Australia, Vietnam, Brunei, Sri Lanka and the Middle East .
“In FY12, we saw a 2.8% overseas contribution to the overall group revenue of RM920.5 million. While we do not mind expanding our operations on a regional scale, we are currently very focused on the local market as there are still tremendous untapped opportunities and potential,” Ng said.

This article first appeared in The Edge Financial Daily, on October 22, 2013.