In a statement, IJM Corp noted the investment aligns with its growth strategy to expand its business into an adjacent vertical since divestment of its stake in IJM Plantations Bhd in September 2021.
IJM Corp chief executive officer and managing director Lee Chun Fai said the company’s investment in Pestech brings synergistic opportunities for both IJM and Pestech in the growing energy transmission and rail electrification sectors.
“By including Pestech’s capabilities into our diversified portfolio, we will create synergies and deliver comprehensive solutions to customers across various sectors.
“Together, we are well-positioned to strengthen our position in the industry, diversify revenue streams and drive sustainable growth,” he said in a statement yesterday.
Fluctuations in material and equipment prices, supply chain disruptions, foreign exchange, and an increase in funding costs have led to operational challenges for Pestech.
Hence, the proposed subscription will allow Pestech to repay part of its borrowings and to fund its working capital requirements, thus allowing Pestech group to focus on its business operations.
Expected to be completed in the fourth quarter of 2023, the proposed subscription will be fully funded via internally generated funds and/or bank borrowings.
Moreover, IJM Corp added that while the deal allows the group to benefit from recurring cash flow streams, it is also expected to enable Pestech to gain access to more engineering, procurement, construction and commissioning contracts.
“The investment also offers IJM access to Pestech’s transmission line projects in Cambodia, where Pestech has already established a foothold, and other developing countries in the region. This further supports IJM’s regional expansion strategy for growth in emerging markets,” IJM Corp said. An integrated electrical power technology company, Pestech’s outstanding order book as of March 31, 2023 is at RM1.56bil.
The proposed subscription will also likely bring about the offering of more comprehensive and turnkey solutions for local and international rail project bids, with the combined capabilities of IJM and Pestech as civil and systems contractors.
“This enhances the competitiveness of both IJM and Pestech, allowing them to gain access to larger projects. IJM has a proven track record in the construction of various railway developments in Malaysia,” it added.