At the LSH Capital AGM on March 28, 2023 (from left) group managing director Lim Pak Lian; independent director Datuk Seri Mohd Nor Yaakob; executive vice-chairman Datuk Lim Keng Guan; machinery, hardware and tools division managing director Lim Keng Hun; and non-executive chairman Tan sri Lim Keng cheng.
LEAP Market-listed Lim Seong Hai Capital Bhd
(LSH) is ready to take on the next step and hop into the ACE Market.
Non-executive chairman Tan Sri Lim Keng Cheng disclosed that the group is eagerly waiting for Bursa Malaysia’s LEAP Market Transfer Framework for companies to migrate from the LEAP Market to the ACE Market, as announced by Prime Minister Datuk Seri Anwar Ibrahim at Invest Malaysia 2023 in early March.
“Even if LSH checks all the listing requirements for the Main Market, we will go step-by-step,” says Lim, adding that the next step would be to the ACE Market primarily.
Lim believes there are plenty of growth opportunities for LSH, thanks to the young blood in its workforce who are readily adopting technology.
This is fuelled by its recent series of proposals including its diversification to expand its scope of business to include property development activities, in line with the company’s plan for an upstream integration expansion into property development and to further strengthen its construction business.
Shareholders’ nod
Days ago, LSH obtained the nod from its shareholders for the series of corporate proposals that, amongst others, include the acquisition of Astana Setia Sdn Bhd (ASSB) and Lim Seong Hai Ventures Sdn Bhd together with the approval for the group to diversify its business to include property development activities.
In a statement, LSH says the proposals are to further expand its construction capabilities by fully integrating digital technologies to optimise its operations, enhance its range of services and solutions as well as to deliver exceptional value to its clients.
Through the corporate proposal, LSH would be able to leverage on the construction expertise of ASSB to create synergy with increased efficiency, improved innovation, enhanced solutions, and larger orderbook.
“This results in a stronger and more effective entity that will propel the growth and profitability of the group moving forward,” LSH states.
Lim believes these proposals will see LSH transform into a full-fledged construction and construction-related services and solutions provider.
He opines that property development is a complementary business segment that is intended to support LSH’s construction, construction-related services and solutions as well as construction products trading divisions.
“The corporate proposals have given us the opportunity to undertake property development projects with a gross development value of RM1.6bil which will benefit the construction divisions under the group,” Lim says.
Moving forward, Lim expects the property development segment to contribute between 15% and 20% to the group’s total annual revenue.
Barring unforeseen circumstances, Lim says the proposals are expected to be completed by May 2023.
To recap, the acquisition of LSH BEST Builders Sdn Bhd (LSHBB) in October 2021 led LSH to diversification into construction and construction-related services and solutions business.
BEST Framework
Under its BEST Framework, the company is now utilising innovative digital tools, such as building information modelling (BIM), drones, satellite radar technology, and cloud platforms.
In regards to this, Lim says the construction industry has historically been associated with manual labour, heavy machinery, and long lead times.
“LSH has identified this problem and acknowledged the potential of harnessing the power of technology to stay ahead of the curve in this rapidly evolving industry,” he says.
Through a forward-thinking approach via BEST Framework, Lim stresses that LSH has been able to optimise its operations, enhance its range of services, and deliver exceptional value to its clients.
According to Lim, LSHBB initially adopted industrialised building systems (IBS) technologies in the construction of their maiden high-rise project, namely LSH33, using system formwork which moulds concrete into its desired dimensions.
As a result, LSHBB has not only reduced dependence on labour by up to 60%, but increased its efficiency and productivity, whereby each level of the building is constructed and completed within one week.
Interestingly, Lim points out that the utilisation of aluminium formwork also eliminates the need for labour intensive carpenters on site.
“Also, the formwork has a much longer lifecycle, with a reutilisation rate of up to 300 times – thus reducing the material waste of the project and project’s carbon footprint,” Lim says.
Under the BEST Collaboration Framework which involves the provision of construction-related services and solutions, LSH will be entitled to certain fees, based on their client’s construction and property projects value of RM2.8bil.
Through this collaboration, says Lim, LSH provides value added services for its clients to save on costs and consequently, improving their margins.
“Ultimately, we will earn a percentage of that cost savings,” he says.
Gamuda IBS collaboration
LSH has also been consistently focused on transforming the construction industry through the integration of technology.
On Sept 9, 2022, LSHBB signed a collaboration agreement with Gamuda Industrial Building System Sdn Bhd (Gamuda IBS) to promote the use of digital industrialised building systems (DIBS) in the construction industry.
Under the collaboration, LSHBB and Gamuda IBS aim to support the construction industry’s transition towards Fourth Industrial Revolution (IR4.0) via digitalisation of work processes and automation of construction work.
According to LSH, this is done by conversion of projects from conventional methods to DIBS and to maximise the potential of utilising BIM.
“With the use of DIBS, a high level of digitalisation and automation is adopted from the design stage through to the production stage,” according to LSH, and that through the implementation of DIBS, construction waste can be reduced, productivity increased, construction periods shortened and labour reliance reduced.
LSHBB is playing its role in the digitalisation of the construction sector, which has the potential to revolutionise the industry by addressing labour shortages, enhancing the quality of work, and promoting sustainability.
Through this partnership with Gamuda IBS, LSH wholly-owned subsidiary Knight Auto Sdn Bhd has completed its sales gallery project using digital IBS solutions, whereby reinforced concrete structures of the building were completed in a record time of one week.
Another project which involves the construction of approximately 1,200 residential units is now ongoing with the first IBS panels being erected on site in March 2023.
“This project utilises a precast bathroom unit concept, whereby the entire bathroom is constructed in the factory, complete with all the tiles and sanitary fittings,” LSH says, adding that the walls and slabs of the remaining part of the buildings are also planned to be pre-casted in the factory and assembled on site.
In view of the benefits reaped through the implementation of DIBS in the past two projects, LSH is now in the midst of preparing another proposal together with their client to construct a 29-storey high-rise residential tower using the DIBS solution.
Robust financial growth
Since its listing on the LEAP Market in July 2021, LSH has seen significant growth in its financial performance.
In its financial year ended Sept 30, 2022 (FY22), LSH reported a net profit of RM41.8mil, a robust growth compared to the net profit of RM7.9mil in FY21 – mainly contributed by its construction segment.
Subsequently, earnings per share (EPS) rose tremendously to 11.76 sen in FY22 from just 2.38 sen in FY21.
Upon completion of the series of proposals, LSH will see its total share issued almost double to about 706 million from 356 million, as at September 2022.
On how LSH will address the dilution of value of investors’ existing shares, Lim says the dilutive impact on the EPS is only temporary.
“We believe that the corporate proposal will be value accretive to all shareholders in the long-run,” Lim explains.
LSH’s construction orderbook, meanwhile, has grown to RM775mil in FY22 from RM490.5mil in FY21.
“Of course there are some projects that were actually completed, but we managed to replenish the orderbook,” Lim says.
Market capitalisation, on the other hand, more than doubled to RM231.4mil in FY22 from RM99.4mil in FY21.
Lim says LSH is working towards achieving a market capitalisation of RM1bil within the next five years.
“Once we reach that market capitalisation, we are supported by a certain level of profits,” he says.
Since LSH’s developments are often tied up with affordable housing schemes, take up rates for its properties are usually more than 80%.
LSH, which made a stellar debut on the LEAP Market by opening at 26 sen or double its offer price of 13 sen, closed at 80 sen per share at 5pm yesterday.
