Eonmetall’s FY19F earnings revised up by 18 per cent
KUCHING: Eonmetall Group Bhd’s ( Eonmetall) financial year 2019 (FY19F) earnings have been revised upwards by 18 per cent, following AmInvestment Bank Bhd’s (AmInvestment Bank) recent meeting with the group.
AmInvestment Bank’s FY19F earnings upgrade forecast was premised upon the positive development in Eonmetall.
According to the research firm, for machinery and equipment, Eonmetall is currently in the final stage of negotiation with a public-listed company for the construction of several pressed fibre oil extraction ( PFOE) plants on a build- operate-transfer ( BOT) basis and expect to deliver the PFOE plants as early as the first half of FY18 (1HFY18).
“In addition, Eonmetall may secure additional two PFOE plants on an outright purchase basis which are expected to be delivered as early 1HFY18,” it said.
Meanwhile, AmInvestment Bank noted that Eonmetall’s steel and trading division earnings are expected to grow stronger in 2HFY18 through is steel racking business.
“The newly formed subsidiary of Eonmetall, Constructor Asia Sdn Bhd ( CASB) was incorporated recently to become contract manufacturer and distributor of the steel racking solution (within the Asia Pacific region ex-Middle East) under the product flagship of Constructor from Europe.
“While Constructor products are predominantly focused on the Europe and Middle East regions, Constructor plans to expand its racking solution business to the Asia Pacific region via collaboration with CASB, whereby Construction would confer licensing rights to CASB to manufacture and distribute its products.
“CASB is expected to begin its operation as early as 2HFY18 with an estimated annual revenue of RM50 million.”
The research firm also noted that Eonmetall’s plans for overseas expansion are progressing well whereby a joint venture (JV) for steel racking manufacturing plant in Bangladesh to cater for steel racking products in the MENA and South Asia regions will commence by 1HFY18.
Additionally, a JV for steel processing plant in the UAE to cater for downstream steel products in MENA region will commence by 1HFY18.
“Nevertheless, Eonmetall guided for a subdued quarter in the third quarter of FY17 ( 3QFY17) due to the lower sales recognition from its machinery and equipment (i.e. metalwork machine and solvent plant) and steel and trading (i.e. steel racking),” AmInvestment Bank said.
Notwithstanding that, the research firm believed Eonmetall would deliver resilient earnings in FY17F as the group’s 1HFY17 net profit came in at 73 per cent due to lumpy billings.
AmInvestment Bank also liked Eonmetall for the growing acceptance by palm oil millers in Malaysia and Indonesia for the group’s oil extraction plants.
“Eonmetall enjoys good margins for these oil extraction plants in the absence of competition, coupled with the in- sourcing of inputs ( steel products and metalwork machinery) used in the fabrication of these plants,” it said.