PJI in a position to benefit


  • Business
  • Saturday, 08 Mar 2003

BY RUBIN KHOO

 

LIKE most other construction companies, PJI Holdings Bhd, whose core business is specialised mechanical and electrical (M&E) engineering services, is poised to benefit from the pump priming measures to be revealed end-month to boost the economy. 

In fact, an analyst says PJI is in a stronger position to take advantage of the stimulus measures given that it already has a full range of government registrations and licences that enable it to bid for public sector contracts on its own. Currently, 70 per cent of its revenue stems from work done for government-related agencies.  

However, since it made its debut on the Kuala Lumpur Stock Exchange second board back in Dec 2001, PJI has garnered little attention in terms of trading volume and its stock is generally deemed illiquid. But that could all change once the company is transferred to the main board, as this typically means PJI has a better chance of surfacing in the radar screen of institutional investors as an investment opportunity.  

“The transfer will hopefully enhance trading liquidity and investor awareness,” says the analyst. The company, at current levels, is trading at a price earnings ratio of 5.92 times. 

PJI has already received the nod from the Securities Commission for the transfer via a two-for-five bonus issue that upon completion will result in an enlarged share capital of RM63.3 million from RM45.2 million. It is also involved in the restructuring exercise of Trans Capital, which will see the former end up with a 6.2 per cent stake in AWC Facilities Solutions (AWC) in return for the proposed disposal of its subsidiary.  

AWC, which will assume the listing status of Trans Capital, holds the concession to provide facilities management services to the “common users buildings” for the federal government in the southern zone. As such, PJI is expected to have a part to play in the M&E works for these buildings.  

“PJI is in a position to benefit from pump priming. It is one of the few engineering companies that specialise in M&E and focuses on construction, infrastructure and petrochemicals,” says an analyst who has been tracking the stock.  

Also, the analyst points out, the company has a “commendable” track record and had effectively weathered the Asian financial crisis and has undertaken several well-known projects. These jobs include engineering works for the KLCC Ramlee LRT tunnel and the Sepang Formula One Racing Circuit. 

As it stands, PJI has a current order book of RM540 million and “unbuilt” progress billings of RM285 million, which include two projects in Singapore. More recently, PJI was awarded a RM38.2 million contract to act as their M&E sub-contractor for the Putrajaya Convention Centre.  

The company has tendered for projects worth over RM800 million, both locally and abroad and is clearly on the lookout for more opportunities in China. Towards this end, it has already made inroads via a 30 per cent stake in a 50-year water treatment and supply concessionaire.  

It is believed that other ventures are also being considered with the possibility of a minority stake although maintaining full M&E participation remains a priority. Tenders have also been submitted for projects in UAE, Qatar and Bahrain.  

Even if these tenders have a conservative success rate of about 18 per cent, an analyst says the company can look forward to about RM145 million worth of new projects in the pipeline. This coupled with its outstanding order book will be able to keep the company busy over the next two years.  

“The company has a strong presence here and a lot of their projects are related to government agencies. Because of that, they also work closely with major construction companies like IJM. Furthermore, their strategy to venture abroad while at the same time maintaining a presence here puts them in a strong position,” says the analyst.  

For the financial year ended June 2002, PJI posted a pre-tax profit of RM20.7 million on a RM187.7 million turnover. For the first half ended December 2002, sales rose to RM110.20 million from RM76.55 million while net profit increased to RM6.07 million from RM5.32 million. 

Thus far, trading on the stock has been within a relatively tight range. The stock hit a high of RM2.60 in Dec 2001 before settling at an average of RM2.17.  

Going forward, with emphasis on the company’s transfer to the main board and its position as a potential beneficiary of government-initiated economic measures, the analyst has a buy call on the stock.  

The company’s management strategy to be selective on contracts, while stepping up cost and margin focus, has also won the favour of the analyst. 

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