Salcon revenue to drop next year, then rebound in 2015

by **Cals** Thu 28 Nov 2013, 07:10

Posted on 28 November 2013 - 05:39am

Ee Ann Nee

KUALA LUMPUR (Nov 28, 2013): Salcon Bhd, which expects to post lower revenue for the next financial year ending Dec 31, 2014 (FY14) following the disposal of its water assets in China, sees its revenue rebounding in FY15 with contributions from its property and other water-related projects.

"We will have to consolidate (our financials) in FY14. When we sell off the concessions (in China), there will be some effect on our earnings," its executive director Datuk Eddy Leong Kok Wah told reporters after the group's EGM here yesterday.

Nevertheless, he said that the lower FY14 revenue expected would not affect its dividend payout to shareholders.

"If the group is profitable, we'll try to reward our shareholders. It's always been like that. Whether good or bad, we will continue with the dividend (payout)," he added.

Salcon has put aside up to RM30 million from the sale proceeds to distribute a special dividend to its shareholders within 12 months.

However, Leong said the quantum of the special dividend will be subjected to the board's decision and it will be announced in the first quarter of next year.
Salcon's venture in China reportedly contributed about RM166 million of the group's revenue of RM344 million in FY12.

"Once we pass through 2014, we should be in a better position. That's why we are complementing it (the shortfall) with property development projects in Selayang, Selangor and Johor. We expect it (revenue) to rebound with the Johor project," said Leong.

Salcon's maiden property project features a 21-storey commercial building in Selayang with a gross development value (GDV) of RM160 million.

It is also scheduled to launch a RM1.2 billion mixed development project in Johor next year, which it is jointly developing with Eco World Development Sdn Bhd, a company linked to SP Setia Bhd's Tan Sri Liew Kee Sin.

Salcon also expects to secure 20% to 30% of the RM2.2 billion water- and wastewater-related projects that it has tendered, including the Langat 2 water treatment plant in Selangor and the Pengerang water treatment plant in Johor.

"We've put in the bid for Langat 2 and we understand that we've been shortlisted. We're hopeful that we'll see some success in this deal," said Leong, adding that if Salcon secures the Langat 2 or Pengerang project, it will be 'overwhelmed' and profits will be higher.

"All we need is just one of the projects and we're working hard at it. We also have projects running in Sri Lanka, Vietnam and the water and wastewater division is contributing a decent profit, easily RM10 million this year. So the other projects are contributing as well," said Leong.

Currently, water and wastewater-related activities contributes 90% of Salcon's revenue but Leong expects the property development to account between 60-70% to revenue in two to three years.

He said with the RM275 million gain from the sale of its China water assets, Salcon gets to start over with a "clean" slate, with no gearing, which will allow the group to look for new opportunities.

"We're optimistic. There are a lot more opportunities in the market. Today, the situation is a bit uncertain and it's good to sit on a pile of cash. Cash is king. With the cash backing, we can be selective (in choosing property projects)," Leong added.

Earlier at the meeting, Salcon shareholders approved the proposed disposals of nine water and wastewater concessions in China for RMB955 million (RM518.3 million).

After the completion of the proposed disposals, the group would be able to leverage on its improved balance sheet to selectively acquire land or enter into joint venture for property development in strategic locations in the Klang Valley, Penang and Johor.