SCH BANKS ON MEGA PROJECTS
Group also expects new business venture to help it return to growth phase from this year
SCH Group Bhd, a quarry industrial products supplier to six Asean countries, is looking at 10 years of earnings visibility from mega infrastructure projects in Malaysia.
The company believes the projects, together with its new business venture in the supply of event equipment, would help to put it back on a growth phase starting this year.
SCH currently supplies quarry machinery and equipment to the country’s major construction players, currently bidding for projects such as the mass rapid transit, Pan Borneo Highway, High Speed Rail and the East Coast Rail Link. It also supplies to Singapore, Indonesia, Thailand, Myanmar and Cambodia.
“This year should be better than last year, brought about by government infrastructure projects. The projects, which will take about ten years to complete and come in phases, will help sustain our earnings,” said executive director Kelvin Khoo recently.
He said its first quarterly financial performance for financial year ending in August was a testament that the company was now back on a growth phase.
Its net profit for the quarter ended November last year jumped 333.33 per cent to RM1.66 million, from RM384,000 in the corresponding period last year.
Based on Bloomberg data, the company’s annual net profit had the worst decline in 2016, but managed to remain in the green and about the same level a year later.
SCH recently announced to Bursa Malaysia that it had acquired the entire stake in TK Tent & Air-Conditioning Rental Sdn Bhd for RM50 million, a move that would expand its products and services to include rental of airconditioning and cooling systems, tents and other event-related equipment.
“The proposals are expected to diversify the group’s income stream, which is currently mainly derived from the quarry equipment business and is dependent on the cyclical nature of the construction industry,” it said.
JF Apex Securities Bhd increased SCH’s target price to 22 sen from 20 sen as the research firm believed the company had earnings upgrade potential from its diversification into the event equipment supply business.
“The better valuation is to reflect the potential earnings upgrade of the group after taking consideration of the full-year contribution of the event equipment rental business,” said JF Apex.