KUB in expansion mode - Business News | The Star Online


KUB in expansion mode

Abdul Rahim: ‘Hopefully, the commencement of our Mukah mill as well as our land bank expansion will be able to provide KUB with additional earnings'.

Abdul Rahim: ‘Hopefully, the commencement of our Mukah mill as well as our land bank expansion will be able to provide KUB with additional earnings'.

PETALING JAYA: Two years after its kitchen-sinking exercise, KUB Malaysia Bhd is focusing on the strategic expansion of its three core businesses while actively exploring options to monetise its non-performing assets.

According to group managing director Datuk Abdul Rahim Mohd Zin, the key growth drivers for the diversified government-linked company are agro, energy and information and communications technology (ICT), which represent about 90% of the group’s total revenue.

“For this year, the bulk of KUB’s capital expenditure (capex) would be for the group’s proposed acquisition of a 1,534ha brownfield oil palm plantation land in Sungai Kinabatangan, Sabah, for about RM100mil.

“The remaining capex of about RM20mil will go into its liquefied petroleum gas (LPG) Bulk Terminal pipeline project, palm oil mill in Mukah, Sarawak, the expansion of A&W outlets and others,” he told StarBiz.

Abdul Rahim said KUB was also looking at expanding its oil palm plantation hectarage in its bid to become a medium-sized planter in Malaysia.

“Ideally, we hope to grow (the oil palm land bank size) to between 15,000ha and 16,000ha.

“Our proposed Sabah plantation has yields of over 20 tonnes per hectare, in which KUB can generate immediate profits.

“In future, we hope to buy similar brownfield and some greenfield land that has good value in terms of pricing and yields,” he said.

KUB Group has about 9,000ha of oil palm plantations in Kluang and Mukah.

“What we need (to acquire) is 6,000ha more in stages within the next couple of years,” explained Abdul Rahim.

The group undertook a rehabilitation and maintenance programme for both its Kluang and Mukah estates last year in its efforts to improve yields within the next one to two years.

“Hopefully, the commencement of our Mukah mill as well as our land bank expansion will be able to provide KUB with additional earnings, going forward.”

Abdul Rahim said that the energy business was the largest earnings contributor to KUB last year.

“It was the best year for our LPG distribution business. On two counts, we managed to find operational improvement in terms of supply and logistics. We undertook a rebranding exercise geared towards strengthening our position in the country’s LPG market.

“As part of this exercise, we initiated several activities to create brand awareness, including improving our cylinder appearance and other proactive marketing measures,” added Abdul Rahim.

On the back of these efforts and adjustment in subsidy from the Government’s automated price mechanism, the group’s energy business profit after tax increased to RM24mil in 2016 from RM9mil a year earlier.

“We also rebalanced our LPG distribution portfolio to focus more on the commercial segment,” Abdul Rahim added.

KUB has planned to increase its LPG sales volume by investing in infrastructure, particularly improving the receipt of LPG at its terminal in Westports, Pulau Indah.

“Our investment in our LPG Bulk Terminal pipeline is expected to be completed in July, and we hope this will add 10% in terms of volume.”

In the longer term, KUB is also proposing to invest in a bigger storage facility.

As for the ICT business, KUB expected it to contribute significantly to the group.

But Abdul Rahim said, “It will be quite challenging this year.”

Last year, the group received an RM43mil project from the Transport Ministry to complete the automatic fare collection system for 53 Keretapi Tanah Melayu commuter stations under its non-telecom business.

It has also successfully secured its first telecommunications asset contract worth RM16mil from the Malaysian Communications and Multimedia Commission.

“This year, we will continue to bid for Telekom Malaysia Bhd ’s (TM) contracts for the supply and installation of equipment related to its high-speed broadband programme. I think we can win more this year, but the timing of the awards does not come as fast.

“Our potential revenue might be pushed forward to later this year and beyond. But we will also look at non-TM related contracts in the future.”

Abdul Rahim said that should KUB’s strategic expansion of its core businesses go as planned, the group would be able to post significant growth in profits.

At the same time, KUB Group is exploring options to monetise its non-performing legacy assets.

On its iconic A&W Petaling Jaya drive-in, Abdul Rahim said the group planned to jointly develop the 1.04acre site into a commercial building with a gross development value of about RM250mil.

“We hope to get the approval for the development order by the middle of this year and we will find development partners for the project,” he noted.

KUB is also disposing of its legacy assets, which are mostly shoplots and buildings in Perak worth about RM30mil.

“There is no point holding on to non-productive assets as they should be monetised for expansion.”

As for KUB Power, he planned to shift its business model from a short-term contract basis to longer-term concessions to ensure sustainable earnings growth.

“We hope to lock in one or two contracts related to energy management and energy-efficient businesses by the end of the year.

“This includes refurbishment, operations and maintenance of the central or district cooling system via tie-ups with other parties.”

As for its food business, he said A&W (M) Sdn Bhd would have 35 outlets by next month from 32 outlets currently.

“We will focus on operational efficiency, store management and improving the overall productivity rate. We will also come up with revenue-enhancement programmes such as identifying local stores’ marketing and the demographics of each store. We will come up with specific menus that are value for money at our stores where the purchasing power is not so high,” said Abdul Rahim.

The group’s cash balance strengthened to RM133.9mil, with total assets surpassing the RM500mil mark. The group’s net gearing ratio was maintained at a healthy rate of 0.21 times.

Corporate News , KUB Malaysia