GAS Malaysia Sdn Bhd, not resting on its laurels despite being the only licensed supplier of piped natural gas in the Peninsular Malaysia, targets to more than double its annual revenue in five years.
Newly-appointed chief executive officer Muhamad Noor Hamid is working hard to make the company into a force to be reckoned with within the local energy solutions industry.
Towards this end, Gas Malaysia has embarked on a five-year plan to generate RM1bil in revenue by Jan 31, 2009.
“I believe our target of RM1bil revenue is conservative as the projection only takes into account existing industries and operations from a survey conducted earlier and not any new industries that will materialise in the future,” Muhamad Noor told StarBiz.
He said that going forward, the company's focus would be on expanding its industrial sector business.
“We plan to increase the number of our industrial customers from the current 261 to 640 in the next five years and this will contribute to us achieving our target revenue of RM1bil,” he said, adding that the bulk of Gas Malaysia's sales volume (about 98%) came from its industrial customers, while 1.7% from commercial and the balance 0.3% from residential.
According to Muhamad Noor, the company will be concentrating on places like Prai, Kulim and Nibong Tebal in the northern region; Pasir Gudang, Senawang and Nilai for the southern region; and areas like Batu Caves, Selayang and Balakong in the Klang Valley.
Currently, 20% of the company's sales comes from the glass industry, 10% basic metal, 16% rubber products, 21% non-metallic mineral, 18% chemical and 15% from other sectors.
“Our exposure is widely spread out in all industrial segments so we have our eggs in a lot of baskets and this is good as a drop in a certain segment would not have much impact on the company.
“We foresee growth coming from the chemical industry, especially in oleo-chemicals,” he said.
Muhamad Noor said Gas Malaysia currently had 830 km of pipeline in the peninsula and planned to triple it to about 2,400 km as part of its five-year expansion plan.
“The company has invested about RM400mil since it started operations in 1992, and we expect to invest RM200mil annually in the next five years,” he said, adding that the cost of pipeline per km was about RM400,000.
Besides the company's focus on industrial customers, he said Gas Malaysia was also working with developers to supply natural gas to new residential areas.
“We are targeting apartments and condominiums, especially as its higher density will provide us with bigger volume,” he said.
Besides expanding, Muhamad Noor said, Gas Malaysia was also on an efficiency drive.
“Gas Malaysia currently has 380 employees and we only plan to increase the number by 5% to 10%. Instead, we will be focusing on increasing productivity by three times in the next five years,” he said, adding that the company planned to achieve its objective by increasing its staff's skill level and merging some of its perations.
Gas Malaysia recorded a 22% rise in net profit to RM41.4mil for the year ended Jan 31, 2004, compared with RM33.9mil in 2003, but revenue dropped 17.5% to RM407.2mil from RM493.5mil.
Muhamad Noor attributed the better performance to the company's strategy to break away from the tradition of being demand-driven to being supply-driven by identifying where its potential customers were and starting network installation first.
“This will make it easier for us to convince consumers to use natural gas and expedite the lead time in the supply of natural gas to them,” he said, adding that with a ready network, it would take only about four months for supply to start compared to eight to 12 months before.
Another critical factor for the growth is the lower price of natural gas from the new tariff structure introduced by the government in March 2003.
“The tariff has made natural gas more attractive to consumers, especially in the industrial sector. Natural gas has become 60% cheaper than liquefied petroleum gas, 40% cheaper than diesel and 25% cheaper than medium fuel oil. Natural gas has become the cheapest source of energy,” he said.
Although the tariff would only be in force until December 2005, Muhamad Noor remains confident that natural gas would still be cheaper compared with other fuel, as it was not pegged to the price of crude oil price or medium fuel oil.
“However, we are in discussions with the Government and Petroliam Nasional Bhd (Petronas) on this matter,” he said, declining to elaborate further.
On the company's expected performance for FY2005, Muhamad Noor sees it as a year of growth for Gas Malaysia.
“It will be an exciting year and we are expecting a 36% increase in sales volume to 42.6 million British thermal units (mmBtu) for FY05, a 31% increase in net profit to RM54mil and a 36% hike in revenue to RM554mil.
“Our industrial customers are targeted to grow from the current 261 to 430 by Jan 31, 2005. It will be a busy year for us,” he said.
On the supply of natural gas, Muhamad Noor said Gas Malaysia, which gets its supply from Petronas, expected natural gas reserves to last for another 50 years based on the current known reserves, production rate and consumption patterns.
“Supply will not run short as there will most definitely be new findings,” he added.
Gas Malaysia is a joint-venture established by Petronas, MMC-Shapadu (Holdings) Sdn Bhd and Tokyo Gas-Mitsui & Co Holdings Sdn Bhd to promote, construct and operate a natural gas distribution system in the Peninsular Malaysia. The company now has 29,700 customers.
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