KUALA LUMPUR: Integrated building materials supplier Chin Hin Group Bhd, which is acquiring Mi Polymer Concrete Pipes Sdn Bhd for RM35 million, expects to see a double-digit growth in its current-year earnings.
Managing director Chiau Haw Choon said Mi Polymer will start contributing positively to Chin Hin for the financial year ending Dec 31, 2017 (FY17) and beyond.
“Revenue contributions from Mi Polymer will not be significant as compared to our revenue of more than RM1 billion. But it will fetch better margins. We expect [a] double-digit [growth] in profitability this year,” he told reporters at the signing ceremony for the acquisition yesterday.
Under the terms of the acquisition, Mi Polymer is providing a profit guarantee of RM6 million for FY17.
Chin Hin’s net profit rose 48.25% to RM44.8 million in FY16, from RM30.22 million in FY15. Revenue, however, declined 11.67% to RM1.06 billion, from RM1.2 billion.
As for Mi Polymer, it posted a net profit of RM7.4 million on the back of a revenue of RM23.3 million for the financial year ended June 30, 2016.
Haw Choon said the acquisition of Mi Polymer, which will be internally funded, is in line with the group’s direction of providing higher-margin products and solutions.
The acquisition effectively positions Chin Hin as Southeast Asia’s first and only integrated sewage specialist, providing a full range of sewage solutions, he added.
The group previously supplied precast concrete pipes of 450mm to 3,600mm diameter, but not pipes smaller than 450mm.
Haw Choon said the government has allocated RM9 billion under the National Sewerage Project, of which RM510 million is earmarked for 2017.
“This is our immediate target market,” he said.
He added that Chin Hin will also eye opportunities across Southeast Asia, besides tapping opportunities in its existing 4,000 customer base within the construction and infrastructure sector.
“We are working with our partners to get into these markets,” he said.
According to him, Southeast Asia holds great potential for the increasing usage of sewage pipes, as its population is projected to grow to 725 million by 2030.
Mi Polymer currently manufactures its products at its factory in Batu Pahat, Johor. It has begun constructing its second factory in Batu Pahat, which will see its capacity double from 20,000 tonnes to 40,000 tonnes per year. The new factory is expected to be completed by year end.
Haw Choon said Chin Hin has an order book of RM300 million, inclusive of Mi Polymer’s RM10 million, with jobs ranging from one to three years. He said demand for affordable housing and infrastructure spending of the government had lent support to growth in its order book.