Pestech on track to meet analysts’ contract win assumption with third contract in FY17

KUCHING: With its third contract win in financial year 2017 ( FY17), Pestech International Bhd ( Pestech) is on track to meet Kenanga Investment Bank Bhd's ( Kenanga Research) FY17E contract win assumption of RM800 million.

Pestech's board of directors announced in a filing on Bursa Malaysia that the group's wholly- owned subsidiary company Pestech Sdn Bhd (PSB) together with Fuji Electric Asia Pacific Pte Ltd ( Fuji) had, via a non- incorporated consortium formed by both parties called ‘ Pestech- Fuji JV', accepted a letter of award from Sarawak Energy Bhd (SEB) on September 23, 2016 in relation to SEB's New Bintulu B, 275/( 132) kV substation establishment for a contract value of RM89.5 million.

“The project is expected to commence on October 4, 2016 and to be completed within 21 months from the commencement date,” the group said.

Kenanga Research was pleased to see Pestech securing this project, which showed the group’s ability to clinch job from existing clients and that said a lot about its track record.

“We understand that Pestech will be recognising the bulk of the contract value in its account as Fuji is playing the role of project coordinator in this project.

“Profit margin is expected to be the same targeted net returns of 10 per cent to 12 per cent,” it said.

With this job, Pestech has already secured three contracts in FY17 totalling circa RM162 million order-book against the research arm’s contract win assumption of RM800 million.

Kenanga Research believed its contract win assumption of RM800 million in FY17 was achievable given that Pestech has tendered for three major jobs, of which the group had high chances of securing.

“These three tenders which could be worth up to RM1.5 billion in total include one local rail electrification project and two substations and transmission lines projects in Cambodia,” the research arm said.

Thus, the research arm kept its estimates unchanged for now, backed by RM965 million of Pestech’s current order-book.

“This contract win again shows that Pestech is able to secure job from existing clients, which tells a lot of its track record,” Kenanga Research reiterated.

“Besides, it is also completing in the same level field with world- class industry players like Siemens and ABB, which showcased its technical expertise.”

The research arm expected another slew of contract flows in the next few months that should propel the company’s earnings to new heights.

All in, Kenanga Research continued to rate the stock ‘ outperform’ for Pestech’s explosive earnings growth story with an unchanged price target of RM2 per share. Adam and Aida just got back from their honeymoon and they had a really good break after months of preparation for their wedding. For now, they will be staying at Adam’s parents’ place but they would like to move to a place of their own eventually. This week, we will be looking at how Adam and Aida manage their finances as a couple and specifically, on the issue of home ownership.

After unpacking their luggage, Adam and Aida were excitedly showing the pictures taken of their honeymoon in Bali to their family members.

They had such a good time and hoped that it’ll never end, but like all good things, it’ll have to come to an end somehow.

Now, it’s time for them to live their lives as husband and wife and it will certainly take some adjustment when the two become one. As money is a sensitive topic, many couples keep the discussion of money out of their relationship.

Ironically, when they do talk about money, they don’t just talk – they argue!

Therefore, it is extremely important that we have heart-toheart talks on our expectations so that we see eye-to-eye on money matters.

Below are some pointers for all newlyweds to consider:

• Your financial plan has to move from being an individual to a shared one involving your spouse

• Decide on how to handle routine bills, paying for the family and children well-being, household budgeting, as well as savings and investments It may be wise to have at least three bank accounts – “My Account”, “Your Account” and “Our Account”.

This would enable each spouse to have some autonomy over their own finances whilst at the same time are able to meet common expenses from their shared account Just as in the case of your individual financial plan, as a couple, you also need to keep aside an emergency fund to take care of those unexpected expenses that can happen to you, your spouse and your family.

• Talk about each other’s investment style, including your respective risk appetite and preferences.

• It is wise to have a common investment portfolio to meet future financial goals, such as retiring together and living a comfortable life.

• These investments are also usually used to pay for your children’s living and education expenses You may need to review your insurance coverage as well, especially if one of the spouses is not working or if there are children coming along.

With dependence, we will most likely need to increase

As a rule of thumb, we can safely allocate up to one-third of our monthly take-home pay towards all our loan commitments.

As Adam and Aida are currently paying off their PTPTN loans and Adam’s car instalment, that leaves them with about RM2,000 for their home instalment.

With a loan tenure of 30 years and an assumed average interest rate of seven per cent per annum, they should limit their home loan to not more than RM300,000.

However, they should also have about RM30,000 cash for down payment and another RM10,000, more or less, for other incidental costs such as stamp duties and legal fees.

With this in mind, they set their goal to save for this purpose for the next one year or so and until then, they will start looking around for their dream home.

There are two good reasons why Adam and Aida felt that buying their own home is preferred than to rent one.

Firstly, by buying a home, they will be able increase their net worth over time while servicing their loan because the value of the house generally increases while the loan amount reduces.

Secondly, owning one’s own home brings about a sense of pride and accomplishment.

It will provide Adam and Aida and their family a greater sense of security in having a permanent roof over their head.

However, when buying a house, you should do your homework! The golden rule of any property investment is: Location, location and location! You may want to consider the following additional tips before buying your home: • D r ive aro u n d the neighbourhood at different times of the day and week to see how your potential neighbours are like, both during weekdays and over weekends.

• Check the infrastructures or facilities in the area that can add value to the house, such as schools, shops, park / playground, public transport and surrounding businesses.

• Watch out also for present conditions and/ or any future development that may make the area economically disadvantaged.

• Check if the property is located on freehold or leasehold land.

The market value of a house on freehold land is usually higher than leasehold land.

However, the preference for either a freehold or leasehold land is subjective to an individual.

• Talk to property experts who can give you sound advice about the property market, suitable locations or types of properties such as apartments, condominiums or landed properties, which have appreciative values.

• Last but not least, shop around for the best possible home loan package.

However, interest rates alone may not be the sole criterion when taking up a home loan, you also need to understand the terms and conditions of the loan, which should be pertinent and flexible enough to suit your needs.

Remember, you must be able to afford to buy and pay for your house.

Otherwise, your dream home will turn into a financial nightmare! Again this comes to predetermination of your budget that will then determine your ability to service the home loan.

(Look out for the seventh story in this series of 12 tomorrow on

September 29, 2016)