Salcon confident of securing 30%-40% of RM2b order book target

by **Cals** Thu 25 Jun 2015, 18:32

Salcon confident of securing 30%-40% of RM2b order book target

SUBANG JAYA (June 25): Water infrastructure specialist Salcon Bhd ([You must be registered and logged in to see this image.] Financial Dashboard) (fundamental: 1.65; valuation: 1.2) is optimistic of securing between 30% and 40% of its targeted RM2 billion order book by end 2015, despite the opaque economic outlook.
Speaking after the company's annual general meeting today, its executive director Datuk Eddy Leong Kok Wah said that on an average the company’s success rate on its order book was at around 20%, but if they were lucky they could hit the targeted figure this year.
“Our order book mainly consists of domestic projects and it amounts up to RM2 billion, out of which RM1.25 billion is local and RM750 million is overseas. We have around eight local projects going on right now and five in Sri Lanka.
“If we could secure one of our local contracts this year we could easily secure 30%–40% of our RM2 billion order book. But it still depends on the party … but we do know we are in the running. We are optimistic. We have our track record. And we are trying hard,” said Leong.
He also added that they are quite comfortable after receiving payment for eight out of their nine concessions in China. Currently, Salcon is sitting on RM270 million as a result of disposing its China portfolio.
“Currently the final concession is under arbitration. The issue with our partner in Shantung is that they want to buy the shares from us but they don’t want to pay the same amount that our Beijing client is willing to pay.
“We are confident of the matter resolving itself and we hope the arbitration will be resolved by third quarter this year,” said Leong who said that they are now looking at areas to invest their China proceeds as some shareholders were not happy with the small 3% bank interest rate it gains as “sleeping money”.
Moving forward, Salcon also hopes that its diversification into the property market and the telco market will contribute to their future revenue when compared to their more traditional water treatment and waste water business.
“We have secured a 15-year concession with Prasarana to lay fibre optics along monorail and LRT lines, providing broadband to the rail service. It’s known as Vox Bahn Technolog (VBT) and we have already laid the cables in January and are now negotiating with all the major telcos.
“We want to work with them and see how we can provide them with this fibre optic facility and they will lease it to the end user or subscriber,” Leong said.
He also added that they have three land banks that are being developed but due to “turbulent times” Salcon is taking more time with it.
“We have diversified a bit into property development. We have got our first project in Selayang, building 280 units of apartments, [which we] hope to deliver by end of next year. The pick-up rate is 70% and above, so it’s quite positive,” said Leong adding that its estimated gross development value is at RM160 million to be factored in next year.
Salcon’s other land banks include a 12.5-acre lot in Johor Bahru and five and a half acres in Kampung Attap, Kuala Lumpur.
(Note: The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)