T7 Global’s decision to diversify showing results
It is believed that about 10% of T7 Global’s orderbook of Rm2.3bil as of the third quarter of 2023 (3Q23) is contributed by the non-energy segments.
Meanwhile, the group’s tenderbook stands at Rm2bil, which is a combination of its energy and non-energy segments.
T7 Global’s decision to diversify has started to show promising results.
In 3Q23, the non-energy segment recorded a 550% y-o-y revenue growth, especially due to contributions from the baggage handling system (BHS) asset replacement programme at Terminal 1, Kuala Lumpur International Airport.
T7 Global bagged the three-year BHS contract in December 2022 via a consortium with Siemens Logistics, undertaken for Malaysia Airports Holdings Bhd.
This project, which falls under the construction segment, features Siemens Logistics’ Variobelt belt conveyor, which will give the airport a higher storage capacity of 2,500 bag positions.
T7 Global is responsible for the installation, steel support and construction, refurbishment of supervisory control and data acquisition.
Within the construction segment, Kay Zhuin says T7 Global targets “specialised projects” such as airport logistics and infrastructure projects by teaming up with reputable original equipment manufacturers (OEMS). “For example, one of our solution partners is Siemens where we work on airport logistics solutions and distributed control systems.”
As for the aerospace business, Kay Zhuin is optimistic about its growth trajectory, especially with the increasing global demand for aircraft.
The group has secured contracts to treat Boeing components and is actively pursuing approvals from other customers as well.
“We are actively exploring additional opportunities with potential aerospace clients to enhance the overall utilisation rate of the T7 Aerotech plant.
“We continue to receive more orders from existing customers and qualify more parts with our existing and new customers,” he says.
It is believed that T7 Global and its Japanese OEM partner is close to clinching a contract from the Defence Ministry to supply an air traffic surveillance system.
A source not related to T7 Global tells Starbizweek that the five-year contract worth between Rm60mil and Rm80mil is in the final stages of approval.
Another key milestone in T7 Global’s diversification away from O&G businesses is the Rm21mil contract it secured from Tenaga Nasional Bhd (TNB) to supply smart metres.
The two-year contract until Sept 28, 2025 will involve the supply of 79,800 units of single-phase radio frequency smart metres, and 19,950 units of three phase radio frequency smart metres.
Following the win, BIMB Securities said that while the contract value is rather small, it was positive that the company may generate recurring income from similar service given TNB’S target to install up to nine million units by end-2029.
Amid robust new orders and the strong growth in earnings, the obvious question among many shareholders would be about T7 Global’s resumption of dividend payouts.
However, Kay Zhuin hints that dividends are not in the cards anytime soon, pointing out that “T7 Global is still a growing company. By prioritising cash conservation, T7 Global aims to strengthen its financial position and ensure ample resources are available for future growth opportunities.
“As our offshore energy assets are capex expenditure intensive by nature, we would like to highlight that the cash flows consist of contributions from long-term leasing of our assets and will eventually pare down the current debt,” he says.