PJI sees more jobs despite slowdown


BY KATHY FONG

DESPITE the general perception of a slowdown in the government construction and infrastructure building activities, PJI Holdings Bhd has little problem replenishing its order book. 

PJI corporate operations director Lee Peng Kuan agrees that there are fewer public projects in the country compared with previous times when the government was dishing out small and mega scale construction and infrastructure jobs to drive economic growth. 

Lee Peng Kuan

“But we are still getting local projects, such as water-related contracts, although the size is not as large as before,'' he told StarBiz

In the past three months, the mechanical and electrical engineering (M&E) company had secured nearly RM110mil worth of government projects, including upgrading water piping and M&E works. 

PJI share price has surged 57% or RM1 to RM2.74 last Friday since May 2. The stock rose 78% year-to-date.  

The counter migrated to the KLSE main board three months ago after implementing a two-for-five bonus issue to expand its paid-up capital. 

The steady rise in the share price has definitely drawn punters' attention. However, “serious” investors are also keen on finding out whether the financial fundamentals of the group justify such substantial gains.  

For the nine months ended March 31, the group posted a net profit of RM8.33mil compared with RM8.19mil in the previous corresponding period, on a higher turnover of RM163.7mil.  

Its diluted earnings per share (EPS) came in lower at 13.16 sen compared with 23.38 sen previously because of the enlarged paid-up capital of 63.28 million shares as a result of the listing exercise followed by a bonus issue.  

PJI currently has RM550mil worth of project in hands that will last until the financial year ending June 30, 2005.  

And half of these projects have not started, which means that the group's current financial numbers have not taken them into account.  

In addition, PJI is bidding for more than RM800mil worth of local projects. “We believe we stand a high chance to secure some of the projects that we are tendering now. We are a niche player in M&E works,'' Lee said.  

The recent government's decision to take control of water facilities and operations from the states in the peninsula also augurs well for PJI's earnings prospects. 

He expects more new water-related projects, such as replacement of the old pipe, and expansion and upgrading of water treatment plants in the future, though not in the immediate term. 

“The government will work on the interstate piping system, which will involve M&E works,'' Lee said. 

Its past earnings performance may reflect PJI's ability to obtain jobs even in tough economic conditions.  

Despite the Asian financial crisis in 1997, PJI has maintained a good five-year profit track record to enable the flotation of its shares on the KLSE second board in December 2001. 

At that time, the management had announced its intention to establish its presence beyond the shores of Malaysia. 

The group's aim is to derive 30% of its earnings from overseas projects in the coming five years, according to Lee.  

Now, PJI has two projects in southern China to build water treatment plants and to supply treated water. 

The two 50-year water concessions will merely enhance PJI's EPS by three to five sen in the first five years. Contributions will increase gradually after the fifth year when the group is expected to have recovered its investment costs.  

According to Lee, the group is in negotiations to obtain a third water concession in China. 

Meanwhile, PJI is working hard to secure the second track of the 850km railway line project in Sudan. 

The estimated construction cost of the railway is roughly US$1.7mil to US$2mil per km. Total cost for the length of 850km will work out to be about US$1.6bil. 

Trans Africa Railway Corp Sdn Bhd (TARC), a joint venture between PJI and Sumatec Corp Sdn Bhd, has already received a letter of intent for the five-year railway project from the Sudanese government. PJI owns 70% stake in TARC. 

To strengthen the consortium's capability, TARC has teamed up with reputable India-based company Ircon International Ltd to jointly submit the proposal and commercial offer for the project.  

Ircon will be involved in the construction process of the railway should it win the contract. 

Ircon plans to participate in building the 338km Ipoh-Padang Besar stretch of the north-south railway double-tracking project in Malaysia. 

Being the leader in the consortium, PJI would be able to enjoy a wider profit margin in the Sudanese railway project, Lee said. 

Furthermore, the Sudanese government is expected to pay in advance for the project. This will be helpful for PJI in terms of financing such a large-scale project. 

The group is rather confident of clinching the deal in northern Africa.  

“The country has very high respect for Malaysian companies. Our partner Sumatec has operated in Sudan for many years,” Lee said. 

Sumatec, which will soon take over the listed status of Malaysian General Investment Corp Bhd on the KLSE, is involved in a Petronas oil project in Sudan. 

 Stock Watch On PJI

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