Naim unveils five-year recovery plan

Firm to rehabilitate construction division, possible sale of non-core assets

KUCHING: Naim Holdings Bhd, which was hit by huge losses arising mainly from the Klang Valley Mass Rapid Transit (MRT) project last year, has put in place a “five-year recovery plan” to bring the company back to profitability.

Sarawak’s leading property developer suffered losses of RM121mil from the MRT project and its oil and gas ( O&G) associate Dayang Enterprise Holdings Bhd.

For the financial year ended Dec 31, 2017 (FY17), Naim recorded a pre-tax loss of RM147mil – the first-ever loss in its 23-year corporate history – from a pre-tax profit of RM4mil previously. Net losses for FY17 came in at RM168.74mil.

Miri-based Dayang – an integrated provider of offshore topside maintenance services and marine charter for the O&G industry – incurred a group net loss of RM152mil in FY17. Naim’s equity interest in Dayang has been diluted to 26.42% from 29.06% following the latter’s 10% private placement in April last year. The dilution has also resulted in an accounting loss for Naim, which is Dayang’s single largest shareholder.

Naim chairman Datuk Amar Abdul Hamed Sepawi and managing director Datuk Hasmi Hasnan put the blame on the MRT project’s losses to delays in site possession, “overloaded” site instructions and changes at the project’s late stage.

“Due to a substantial shortening/ compressing of the construction period by the client by as much as 25% time-wise, the company had to incur prolongation and acceleration costs to deliver the six stations to the client.

“Further, we also made a prudent and conservative estimation of claims with the clients, and the additional overheads to be incurred until the end of the contract maintenance period, which is in the fourth quarter of 2018,” Abdul Hamed and Hasmi said in a detailed explanation on “why was the loss?” in a “letter to shareholders” in the company’s recently released 2017 annual report.

Are there more losses to come? “We believe we have weathered the worst storm in our group’s existence and that the loss of this size is a one-off situation that must not be repeated in the future,” they said.

To recall, subsidiary Naim Engineering Sdn Bhd had won two contracts worth a combined RM412.7mil to build six stations for the MRT project. The MRT project was Naim’s first undertaking in Peninsular Malaysia where it spread its wing in 2012.

Abdul Hamed and Hasmi said Naim was aggressively pursuing the recovery of certain claimable prolongation/acceleration costs for the project from the clients.

On the five-year recovery plan (2018-2022), they said it was a roadmap and fresh start for the group to move ahead. The seven-point plan includes rehabilitating the group’s construction divi- sion and nursing it to profitability (the division’s losses widened to RM94mil in FY17 from RM19mil in FY16); the possible sale of non-core and other assets; capitalising the company adequately, and focusing on medium affordable housing and enhancing the sale of high-end properties.

Abdul Hamed and Hasmi said with an outstanding order book of RM2bil, the construction division was now focusing on completing the ongoing projects on time. These projects are the Pan Borneo Highway work package, the KPJ Miri specialist hospital, the Tanjung Manis housing and the Syarikat Perumahan Negara Bhd affordable housing scheme.

Naim had also recently secured the University College Technology Sarawak phase 2 project via a joint venture (JV) with Hock Peng Organisation.

“We will continue to collaborate with reputable JV partners for large projects, such as what we have done for the Pan Borneo Highway project with Gamuda Bhd,” they said.

Naim has not revealed which are the non-core and other assets that it may sell to raise funds for its working capital and pare down debts.

Abdul Hamed and Hasmi said as property development remained the group’s mainstay, it would zoom in on residential projects with units priced below RM500,000, and push for the sale of the remaining units in its high-end condominium projects in Bintulu and Kuching.

Naim is constructing a proposed 34-storey condominium named The Peak under the Bintulu Paragon project. Work has progressed to the 22nd storey. In Kuching, Naim’s first high-rise condominium, Sapphire Classic, has recorded more than 80% take-up rate.

The company has unveiled the show units for its proposed second condominium tower Sapphire Deluxe.

In FY17, Naim’s property division recorded sales of RM113mil and a profit of RM6mil against RM149mil and RM16mil in FY16.

Asset-rich Naim owns some 2,500 acres of land bank mostly in Kuching, Miri and Bintulu with an average book value of RM170,000 per acre.

On Dayang’s prospects, Abdul Hamed and Hasmi said the fiveyear maintenance, construction and modification services contract the company had secured from Petronas Carigali Sdn Bhd early this year was expected to contribute positively to its bottomline. Dayang has a current order book of RM2.8bil.

“While we suffered the first loss in our corporate history, we are still a strong company fundamentally, backed by our net tangible assets, which now stand at a healthy RM1bil,” they said.

Due to its dismal performance, Naim’s share price has taken a beating, currently trading at around 95 sen. Year-to-date, Naim has lost over 30% from the RM1.42 recorded on 2017’s last trading day.