Saturday, 14 January 2017

(The Star) Bina Puri eyeing RM1bil jobs this year

Contractor has tendered for domestic contracts worth RM5bil amid competitive environment
Construction and property firm Bina Puri Holdings Bhd has up to now tendered for about RM5bil worth of local jobs and hopes to secure at least RM1bil from that pool this year, its top official says.
The tender book comprises road, infrastructure (LRT and MRT), buildings (housing, government buildings, affordable housing) and flood mitigation jobs.
Last year, the company, 25% controlled by the Tee family, obtained some RM800mil worth of jobs, all mainly from the Government.
Notably, some RM60bil worth of contracts in total were awarded by the Government to contractors last year.
Helped hopefully by more jobs, Bina Puri expects its financial results to be “better” in the coming quarters although profit margins have not improved due to fierce competition.
“It’s a crowded field,” group executive director Datuk Matthew Tee Kai Woon whose grand-uncle founded the company, tells StarBizWeek.
Generally, gross margins for contractors are around 7% to 8% these days, down from the 15 % to 20% during the hey-days.
However, Tee who is also the immediate past president of the Master Builders Association Malaysia (MBAM) says with the ongoing implementation of the 11th Malaysia Plan (11MP) which started last year, there will be a continued inflow of jobs of which the construction industry will be the main beneficiary.
Last year was a reasonably good one for the industry in terms of job flow.
In 2016, construction contracts were awarded relatively quickly with total jobs awarded by the Government coming in at almost RM60bil, substantially more than the RM22bil awarded the year before.
Among the big ones that were dished out via different slews of packages were the MRT 2 and the Pan Borneo Highway projects.
Bina Puri’s joint venture with Cahya Mata Sarawak Bhd was one of those awarded a RM1.36bil contract for the proposed development and upgrade of the Pan Borneo Highway which will connect Sarawak, Sabah and Brunei when it’s ready in 2021. Bina Puri has 30% in that JV which was announced last July.
A month later, the company, obtained a contract worth RM80mil from Arus Sutera Sdn Bhd for the Program Perumahan Rakyat (PPR) in Sabah in which it accepted the role of project management consultant to design, construct and complete 440 units of five-storey walk-up flats in Pitas.
‘Feel good’ factor
“There are more projects that have to be implemented before the next General Election for the “feel-good” factor, therefore members of the industry should be able to ride on the wave of new projects, moving forward,” Tee adds.
Bina Puri, a fairly closely-watched stock among its peers, reported a net loss of RM1.43mil for its third quarter ended Sept 30 against a net profit of RM1.22mil for the same period, a year earlier.
Tee says that slip into the red was caused mainly by certain projects which failed to yield the targeted profits.
Up to the nine months ended Sept 30, Bina Puri made a net profit of RM287,000 on revenue of RM839.6mil compared with a net profit of RM3.76mil on revenue of RM799.87mil, a reflection of how much already-squeezed margins have been squeezed even further.
Currently, the company’s orderbook stands in excess of RM2bil, Tee says.
“Some of the projects we are eyeing this year include the RM9bil LRT3 project and MRT projects as we already have prior experience in these areas,” Tee says.
As for its property development project which is located 2km from Kuantan city, Tee says land reclamation, will “hopefully” take place this year.
Recall last October, Bina Puri and China-based CCCC Dredging (Group) Co Ltd said they will invest some RM15bil over the next decade for a mixed development project in Kuantan - the 500-acre Kuantan Waterfront Resort City (KWRC).
KWRC which will be done on a 50:50 basis will be developed entirely on reclaimed land and is designed to be the capital city’s first integrated resort, leisure and entertainment destination.
In a note to clients, TA Securities which tracks the company says Bina Puri’s current RM2bil orderbook provides earnings visibility for the next 3 years.
“Going forward, we expect Bina Puri to tender for work packages under the LRT3, MRT2 and the planned RM311mil Kota Kinabalu Bus Rapid Transit project,” it tells its clients.
Bina Puri also has a power segment where it has 28MW capacity of micro-diesel generated power plants across eight locations in Indonesia.
Shares in Bina Puri last traded at 45 sen, giving it a market capitalisation of slightly over RM100mil.

At this price, it is trading at a price earnings ratio (PE) of about 9 times against the industry average PE of 10 to 13 times.