Ahmad Zaki Resources Bhd (AZRB) targets to replenish its construction order book by RM800mil to RM1bil this year, inclusive of the highly anticipated job in the development of the mass rapid transit (MRT) line 2.
Group chief operating officer Datuk Roslan Jaffar says although the construction industry outlook is robust this year, supported by a couple of developments of urban rail network in the capital, he admits this target is lower than what was recorded last year when the company clinched its first toll concession job, the East Klang Valley Expressway (EKVE), worth RM1.55bil.
AZRB’s order book stands at RM3.47bil as at Sept 30, 2015 that should keep the company busy for the next three to four years.
“We think that’s a reasonable replenishment target for this year as about RM600mil worth of jobs are already within our grasps; it will be just a matter of time announcing them accordingly,” he tells StarBizWeek.
Roslan, who is also an executive director, believes the company stands a good chance to win one of the viaduct packages in MRT line 2, based on its proven track record in MRT line 1.
“We have submitted our bid and being a contractor in MRT line 1 gives us a bit of advantage as our knowledge and technical expertise have been tested.
“Although there are more packages to be offered in MRT line 2, to win one is already an achievement,” he says.
Roslan says AZRB is also keen to bid for light rail transit (LRT) line 3, depending on the scheme of the line development which he believes will be quite similar with MRT.
“Other than infrastructure, we are quite positive on the outlook of the sector and will be on the lookout for other types of construction jobs such as hospitals and office buildings,” he says.
AZRB has delivered its portion of job in the MRT line 1 package V6 valued at RM700mil.
Tendering process for MRT line 2 began in October last year, leading to its groundbreaking in the second quarter of this year.
Meanwhile, the dishing out of major work packages for the RM9bil LRT 3 project will also probably start from the beginning of the second half of this year.
Busy year ahead
On its ongoing projects, Roslan expects some of AZRB’s notable jobs to pick up steam this year.
“For example, the EKVE, which started initial ground works in September 2015, will be in full swing this year as the company expects to receive its first drawdowns from Government-support loan and sukuk by end of this month.
“EKVE’s capital expenditure is projected to be around RM300mil to RM500mil this year. We are excited as this is our first toll concession and hopefully it is not the only one,” he says.
For EKVE, AZRB’s debt financing facilities include a Government-support term-loan facility of up to RM635mil.
EKVE has also signed a guaranteed sukuk murabahah facility agreement with Bank Pembangunan Malaysia Bhd and Maybank Investment Bank Bhd for a guaranteed Islamic medium-term notes facility of up to RM1bil.
The 35.5 km EKVE is the eastern and final uncompleted route of the Kuala Lumpur Outer Ring Road. The expressway will provide a bypass route and enable motorists from the southern part of the Klang Valley like Cheras, Bangi and Subang to travel to Selayang and Gombak and vice-versa without having to go through the city centre. It will also serve as a bypass route around Kuala Lumpur for inter-regional traffic from Karak Highway.
Additionally, Roslan reveals that the company’s RM673mil construction job at the old Malaysian Airline System Bhd building in Jalan Sultan Ismail will begin this year, as related issues have been ironed out.
The project was awarded to AZRB in October 2012 by Permodalan Nasional Bhd. This job requires AZRB to build a 50-storey hotel tower in the heart of Kuala Lumpur.
Roslan says it will also start building the RM386.65mil apartment and office block along Jalan Raja Muda Musa, Kampung Baru. The job was awarded by Uda Legasi Sdn Bhd last September.
The development consists of a 47-storey building containing 639 apartments, a 29-storey commercial office building and a level of basement carpark.
Apart from pure construction jobs, AZRB has several property development under its belt and they are most likely to use its in-house contractor as well.
The latest one is R3-4 in Kwasa Damansara which was awarded to AZRB just about two about months ago.
Project R3-4 covers 3.91 acres of freehold land. The proposed development will consist of 188 units of 162 high-rise twin tower condominiums and 26 units of garden villas.
Apart from that, Roslan hopes to launch the residential units in Paka, Terengganu, dubbed Tiara Paka, this quarter.
AZRB’s oil and gas business currently contributes the highest chunk of its bottom line, surpassing its construction business which reigns higher in terms of revenue.
“Obviously, our oil and gas business in providing supply bases to the oil majors has higher margin. Our Tok Bali supply base in Kelantan is only expected to be ready by middle of this year. It gives us a lead time to see improvement in the global oil price.
“Having said that, it is also important to note that there are already exploration activities in that area and it only makes sense for the oil majors to utilise a nearer supply base as compared to Kertih or Songkhla,” he says.
AZRB acquired 51% equity interest in Matrix Reservoir Sdn Bhd (MRSB) for RM55mil last November. With the acquisition, MRSB becomes a subsidiary of the AZRB group.
MRSB is the owner of TB Supply Base Sdn Bhd (TBSB), which is the operator of the Tok Bali Supply Base in Kelantan.
The supply base is well positioned to offer integrated logistics services to production-sharing contractors and oil and gas service companies operating in the North Malay Basin, Malaysia-Thailand Joint Development Area and Commercial Arrangement Area between Malaysia and Vietnam.
“This will only complement our supply base operation in Kertih as it already has the advantage of servicing oil majors in that area as well,” he says.
Another business division AZRB is growing is its palm oil plantation in Kalimantan.
Roslan says that currently, the division has a total of 7,100 ha of planted area but will expand it to 10,000 ha over the next two years.
“Currently, we are still in the investment period. We expect this plantation division to contribute positively to the group by 2017.
“In the mean time, if the right opportunity comes along, of course we are interested to acquire more plantation areas,” he says.
Path, prospects and profit
Roslan explains that AZRB at the end of the day is essentially a construction company.
“The ‘diversification’ now is to derive better value from our construction expertise, hence the property development and also toll concession,” he says.
He describes the plantation and oil and gas divisions as cushions for the company to be more defensive because the construction business can be quite cyclical in nature.
“Yes, construction jobs have been good for the past six years but our experience from 2002 to 2004 has taught us to be more prepared,” he says.
AZRB’s net profit for the nine-month period ended Sept 2015 was RM17.4mil compared with almost RM10mil in the same period in 2014.
“And for this year, with the development of our notable construction jobs, revenue is expected to jump sizeably,” he says.
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