AWC on track to diversify into rail works

> Shareholders approve acquisitions of 60% stake in Trackwork & Supplies

PETALING JAYA: AWC Bhd’s shareholders have approved the acquisition of a 60% interest in track materials supplier Trackwork & Supplies Sdn Bhd, paving the way for AWC’s diversification into rail-related works.

“With the completion of this transaction, this acquisition now having become unconditional after shareholders have approved it, and we expect to complete it early October, it is going to contribute positively towards the future earnings of AWC,” CFO Richard Voon told reporters after its EGM yesterday.

“So moving forward, from October onwards, we will start to consolidate Trackwork as a 60% owned subsidiary and obviously their order book and tender book will add on to AWC’s,” he said.

As at June 30, AWC’s order book stood at RM965 million and tender book at RM2.3 billion while Trackwork’s order book and tender book stood at RM70 million and RM900 million respectively.

The acquisition of equity interest in Trackwork includes a net profit guarantee of RM8 million and RM12 million for the financial years ending Sept 30, 2018 and 2019 (FY18 and FY19) respectively.

“As at June, they have already achieved RM7.6 million. So they are comfortably confident that they will achieve the first RM8 million. This profit, more importantly, is retained in the company although we don’t get to consolidate, given the lateness of this completion. It remains in the company and will help us reduce the goodwill,” said Voon.

In addition, the dispute between Trackwork’s international principal Gemac Engineering Machinery Co Ltd and Fajarbaru Builder Sdn Bhd will be fully settled once Gemac makes the final payment of RM5.6 million in December.

Earlier in June, Fajarbaru Builder made a RM19 million claim against Trackwork and Gemac for supplying defective machines, which delayed AWC’s acquisition of interest in Trackwork.

The parties subsequently agreed to a final settlement sum of RM14 million to be paid in three installments. The first and second payments were made in June and September while the final and third payment of RM5.6 million is due in December.

Meanwhile, AWC’s facilities management business has an order book of RM704 million, of which RM186 million is non-concession related. The balance comprises government contracts, including maintenance works for 31 federal government buildings in the southern zone and Sarawak under a critical asset refurbishment programme (CARP).

“For facilities as a whole, we are confident that with the existing orderbook in hand, it should keep us busy, the concession portion as well as the CARP portion, through 2025. Non-concession is RM186 million, these are good for another four years,” said Voon.

“We are trying to wean ourselves off dependency on government concessions. Hence we have gone out to the market to competitively bid for jobs as well and it has shown results,” he added.

The order books of AWC’s engineering and environment divisions stood at RM139 million and RM122 million respectively.