KUALA LUMPUR: Safety glass and metal roofing maker Ajiya Bhd hasn’t had a good ride this year.
Earnings for the nine months ended Aug 31, 2016 (9MFY16) dived 44% from a year ago, which it said was due to weak market conditions of the construction sector, which in turn affected demand for its products.
Ajiya managing director (MD) and founder Datuk Chan Wah Kiang admitted that FY16 had been a bad year so far for the group’s traditional businesses, namely safety glass and metal roofing, due to a margin squeeze and stiff competition that came about from the influx of imported products from China.
“I wouldn’t call it dumping activities, but what they (Chinese developers) did was bring in building materials like round bars wholesomely from China into Malaysia. That’s their way of sourcing building materials.
“Last year was the worst and it continued this year, but hopefully the impact will start eroding next year,” Chan said in an interview with The Edge Financial Daily.
Specifically, its 9MFY16 net profit came in at RM9.46 million or 9.51 sen per share, against RM16.76 million or 24.21 sen per share previously, as revenue fell 7% to RM294.76 million from RM318.5 million.
Ajiya is now regrouping and banking on the adoption of its new integrated building system (IBS) to recover the earnings traction it had lost, Chan said.
Though the system, dubbed the Ajiya Green Integrated Building System (AGIBS), is new — it was launched just last year — Chan believes it is a very competitive system that should help the group improve its earnings performance in FY17 ending Nov 30, 2017.
With the AGIBS, Chan said Ajiya is among 15 companies shortlisted by the Public Works Department (JKR) to supply the AGIBS to contractors to build about 100 schools in Peninsular Malaysia, though he did not reveal the value of the job.
“With the contribution of the AGIBS, we expect our earnings in FY17 to at least match the one in FY15, which is about RM22 million, if not better. But with a challenging environment, we dare not be too optimistic,” he said.
On average, the per-unit price of the AGIBS is about RM20,000 to RM25,000, which will provide Ajiya a reasonable double-digit profit margin, according to Chan.
At present, the AGIBS does not contribute much to its bottom line, but Chan expects it to make up at least one-third of the group’s earnings in FY17, while its metal roofing and safety glass businesses are expected to make up the remaining two-thirds.
Ajiya started as a metal roll-forming manufacturer in 1990, before venturing into the production of high-value-added safety glass products. Its products cater to users from industrial commercial buildings to common residential homes. Today, Ajiya operates 19 factories and warehouses with offices throughout Malaysia and Thailand.
In Malaysia, Ajiya is competing with the likes of Astino Bhd and NS BlueScope Lysaght Malaysia Sdn Bhd.
According to Chan, its new IBS is a game changer for the construction industry, due to its environmentally-friendly and systematic installation, which requires less resources. Its main components are made up of metal roofing, trusses, metal frames, ceiling products, sunshade panels, composite floor decking, safety glass and lightweight wall frames.
“[The] AGIBS is a combination of new inventions and our existing products. We combine their advantages and disadvantages, and came out with a system that is suitable for our environment,” he said.
At the moment, Ajiya is targeting landed properties, affordable homes and low-rise buildings with the AGIBS.
“Our components can be delivered to the site by light trucks, and then assembled like Lego,” said Chan, adding that Ajiya is not focusing heavily on the private sector at this point in time.
“Malaysia is a tropical climate country. People like to have a wall that is solid, [yet] one that they can break down and make extensions to,” he added.
With the AGIBS, contractors can shorten the construction development project period from the usual 24 months to 18 months, he said, adding that with this system, Ajiya had attracted the attention of some notable institutions.
“Any stakeholder which is related to the affordable housing segment, be it Perbadanan PR1MA Malaysia, Syarikat Perumahan Negara Bhd, the [urban wellbeing,] housing and local government ministry, or [the] Public Works Department, has visited our site,” said Chan.
Currently, Ajiya is working on two PR1MA projects in Simpang Pulai and Tapah, Perak, which comprise 1,000 units of single-storey and double-storey houses. They will be delivered in the first quarter of next year.
Ajiya didn’t secure the jobs directly from PR1MA as the company is not a contractor, but a manufacturer and system provider. “We were introduced by PR1MA to work with the appointed main contractors, and we supply the system to the latter,” Chan said.
Going forward, Ajiya would be participating in PR1MA Bidor and PR1MA Gopeng in Perak, as well as Perumahan Penjawat Awam 1Malaysia, PR1MA in Pahang and some affordable housing projects in Kuching.
Ajiya on Oct 24 inked a memorandum of understanding with galvanised and coated steel product maker YKGI Holdings Bhd for a long-term business partnership in Sabah and Sarawak. “Over the years, we have not explored East Malaysia much due to manpower constraints. Now, with the partnership with YKGI, we hope to do more in this part of the country,” said Chan.
Outside Malaysia, Chan said, Ajiya had taken the AGIBS into Thailand, where the group sees good demand for the system, and intends to introduce it in Indonesia next.
Year to date, Ajiya shares have lost 47% to settle at 58.5 sen last Friday, bringing it a market capitalisation of RM178.18 million. It is currently trading at a trailing 12-month price-earnings ratio of 13 times and a price-book value of 0.57 times.
On the poor share price performance, Chan said the selldown was by institutional investors. Nothing had changed within the company, he stressed. Chan was appointed to the board as an MD in September 1996. He is a substantial shareholder of the company with a 28.8% stake.
“We have never been in the red for the past 80 financial quarters, and we will remain profitable for at least another 20 quarters in the coming years. So I think it’s just an overreaction, maybe due to our weaker earnings performance,” he said.
On that note, Chan said he is still accumulating Ajiya shares, saying the current share price is “ridiculously low” and “undervalued”.