Merge Energy in diversification mode

> Moving into auto services and plantation machinery businesses to boost recurring income

SHAH ALAM: Merge Energy Bhd is venturing into the auto services and plantation machinery businesses to boost its recurring income stream.

Executive director and CEO Datuk Abdul Jalil Abdul Karim ( pix) said it recently acquired auto services provider Arena Terbaik Sdn Bhd, which has been in operation since 2013, with a view to benefit from the maintenance of vehicle fleets for the public and the private sectors.

The group completed the acquisition of Arena Terbaik last week for RM50,000. Arena Terbaik is principally engaged in the business of providing repairing and maintenance services and trading of parts and equipment specialised for motor vehicles.

Merge Energy is also in the midst of applying for an approved permit (AP).

“It’s a small business but it’s a sure business, where we can have a small revenue stream, and in the future, have an AP to import cars and some selected vehicles for government use,” Abdul Jalil told reporters after Merge Energy’s AGM here yesterday, adding that it plans to import mid-range to luxury vehicles, as well as big motor-cycles.

He said the group has a landbank of 30 acres in Serendah, Selangor, should it need a big area for a workshop or yard to place imported cars.

Merge Energy is also considering offers for development of the land into residential, commercial or industrial projects, or outright sale.

Abdul Jalil said it is also looking at importing construction and plantation machinery from China, as there is a big demand for such machinery given the high exchange rate to buy equipment from the US and Europe.

“We’re keen to explore the plantation machinery opportunity. We look at this to be a good prospect in the future as the plantation business is growing and there’s a big demand for plantation machinery,” said Abdul Jalil.

Executive director Raizita Ahmad said these two businesses will not be its main activities but will provide steady, recurring income to the group.

Merge Energy and its subsidiaries are principally contractors of various kinds of building, structural and civil engineering works as well as a specialist in contracts for infrastructure and water works. Construction makes up 90% of the group’s revenue.

The group saw a net loss of RM1.4 million in the first quarter ended June 30, 2017, mainly due to a drop in progress billings with project completion and no new projects secured.

Raizita said the group hopes to do better in the second quarter, with its new ventures and prospects, as well as internal restructuring for cost savings and downsizing of contract staff.

“Nevertheless we’ve put in bids, private and government, but we’re looking at putting in more bids with government-related companies. We’re doing okay in this business. We’re trying to offer our services to other government sectors, as they’ve a lot more facilities to maintain,” said Abdul Jalil.

He added that Merge Energy has a tender book of RM800 million for water and general infrastructure works, and the building of industrial parks for governmentrelated companies. It has an outstanding order book of RM40 million.

Despite limited construction tenders, especially in the water-related sectors and fewer projects due to limitation in government budget, Abdul Jalil opined that Merge Energy is doing fine.

“Our specialty is more on building water infrastructure but the government is not scaling down on the development. They’re slowing down the implementation, but the need is there. Selangor has to build new plants.

“Bidding for water projects, the issue is on the price being so competitive. There are many players and construction companies, and we’re one of them, so there will be lots of price war but we’re okay. As long as there is a healthy margin to live on, we’re doing fine,” said Abdul Jalil.

Merge Energy closed 5.26% lower at 36 sen yesterday with 47,700 shares traded.