Pintaras Jaya outlasts listed rivals


AMONG a handful of piling companies that were listed on Bursa Malaysia in the mid-90s, Pintaras Jaya Bhd is the only one that is still standing today, commanding a market share of 10% to 15%.

The other public piling companies then, like Pilecon Engineering Bhd, UCP Resources Bhd, L&M Corp Bhd, General Soil Engineering Holdings Bhd did not last long after the 1997 financial crisis.

At present, other key piling players in the market include unlisted Geopancar Sdn Bhd, Sunway Group’s Sunway Geotechnics (M) Sdn Bhd and Econpile Holdings Bhd , which is en route to the Main Market.

That leaves investors very limited choices for an exposure in the specialised construction segment, which is also more lucrative compared to general works.

In the case of Pintaras Jaya, its 30% profit margin speaks volumes on how well the company is run.

In an interview with StarBizWeek, managing director Dr Chiu Hong Keong attributes the high margins to its expertise, track record and reputation in the market as well as its machineries, which had been fully depreciated and amortised.

“Due to our history, we are able to price competitively because we have invested in the machineries since the early days,” he says.

Thanks to the quick turnaround of the business, it has a strong cashflow that allows it to employ such a strategy, which in turn helps the company to save on cost.

He points out that purchasing piling machineries is capital intensive and the company has been buying equipment using cash instead of relying on loans.

On average, a piling contract takes six to 12 months as compared with construction work that may span over three years or more.

Another snippet is that Pintaras Jaya is sitting on RM104.7mil cash, which translates to 16% of its market cap.

Chiu says Pintaras Jaya does not have definite plans of utilising the money but may consider a merger and acquisition for its manufacturing arm should a good deal come by.

The company has also been paying out 38% of its profit as dividend diligently.

To maximise returns, some RM50mil of its funds are managed by professional fund managers.

“We started this approach about 15 years ago when fixed deposit rates were low. It has turned well for us thus far so we will continue to do it until we need the money,” he explains.

As for its bread and butter, it prefers to grow steadily.

Despite the growth in demand for piling work, he says the company will expand without haste as it had invested some RM100mil for its expansion since 2008.

“The company’s size has doubled in the past two to three years, so we want to ensure that the growth is sustainable,” he says, adding that it required some time to absorb the growth.

It is bidding for works valued between RM2bil and RM3bil while its orderbook stands at RM300mil, almost double from a year ago.

Underpinned by the exuberant construction scene in the country, which counts mega projects like Klang Valley Mass Rapid Transit Line 2, Kinrara Damansara Expressway, West Coast Expressway, Petroliam Nasional Bhd’s refinery and petrochemical integrated development (Rapid) in the pipeline, Chiu is optimistic of Pintaras Jaya replenishing its orderbook.

While most of the work is concentrated in the central region, he expects potential jobs from the Iskandar region, which has experienced a slew of property and development activities.

“Despite the pullback in the property sector, we do not see any slowdown in terms of the work flow,” he says.

Traditionally, a huge chunk of the piling specialist’s revenue is derived from the private sector primarily for high rise residential and commercial buildings.

However, he notes that jobs from the public sector and government-linked project are beginning to contribute much more significantly to its topline, which now stands at 40%.

For instance, winning the RM74mil contract to carry out foundation works for the 118-storey Warisan Merdeka marks a milestone for the company as it was involved in the construction of an iconic building.

“Clinching the project means a lot to us as it proves that local piling players are able to compete with the multi-national companies,” the low-profile businessman says.

Notably, piling works for the country’s tallest building Petronas Twin Towers was awarded to Soletanche Bachy from France.

That said, the success is not without perseverance as the tender process for the job took more than two years.

He says the understanding of Malaysian ground gives local players an edge in handling the earth works.

He welcomes competition from its peers as he believes all the players will get a slice of the pie considering the construction sector is still bustling with activity.

Jobs are aplenty as he observes the trend of big construction players taking up the role as managing contractors, hence creating opportunities for piling works to be awarded to sub-contractors.

While prospects in the industry remains rosy, the shortage of man power and skilled labour is putting a cap on the company’s growth, he quips.

“From 2013 to 2014, the wage hike recorded between 20% and 30%.

“We can buy machineries but we cannot buy ‘ready-made’ skilled workers so we had to train and fast track our existing talent pool to fill in the gap,” he says.

He says that labour and machineries make up close to 50% of its cost while raw materials made up the other half.

He opines that steel prices are stable with a downward bias while cement prices are trending higher due to the hike in gas prices.

The rise in energy cost is also pressuring its cost but construction analysts believe the industry could pass on part of its cost to its clients due to a shortage in piling capacity.

Although share price of the counter has staged a strong rally, doubling from a year ago, RHB Research is calling a “buy” with a target price of RM4.61 based on 12 times 2015 earnings per share of 38.4 sen.

Pintaras Jaya Bhd