Gas Malaysia allocates RM140m for expansion
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This article first appeared in The Edge Financial Daily, on May 12, 2016.

 

KUALA LUMPUR: Gas Malaysia Bhd said it is allocating up to RM140 million for its expansion plans this year, which include growing its natural gas distribution system network in Peninsular Malaysia.

Gas Malaysia chief executive officer Ahmad Hashimi Abdul Manap said the group expects to build up to 100km of new pipelines across several states, including Perak and Johor, in 2016.

“We have allocated about RM130 million to RM140 million in capital expenditure, which will mainly be spent on the core business of building pipelines in Peninsular Malaysia. We expect to build between 80km and 100km of new pipelines this year,” he said.

He noted that the group laid 74km of pipelines in 2015, bringing its pipeline length to 2,139km.

Meanwhile, he said Gas Malaysia’s three new businesses — namely the combined heat and power (CHP), virtual pipeline and bioCNG (biogas compressed natural gas) businesses — which it embarked on two years ago, will commence contributions this year.

He said the CHP business, which is a 66:34 joint venture between Gas Malaysia and Tokyo Gas Engineering Solutions Corp, will be seeing its first plant in Prai, Penang, fully operational by the third quarter of 2016.

The virtual pipeline business is also expected to commence contributions in the third quarter, while the BioCNG project, a joint venture with Sime Darby Offshore Engineering Sdn Bhd for the distribution of biogas, is expected to begin sometime in mid-2016.

“However, the contributions will not be very significant this year, as they are still in their early stages. But in the next five years or so, these new businesses are expected to contribute about 20% to 30% of our bottom line,” said Ahmad Hashimi.

In terms of earnings for the financial year ending Dec 31, 2016, he hopes to see better performance, in line with the growth in volume and its customer base.

On the margin compression faced by Gas Malaysia, Ahmad Hashimi said the group is in close consultation with the government to ensure it maintains a sustainable margin moving forward.

He spoke to the press yesterday after the conclusion of the group’s 25th annual general meeting.

Gas Malaysia also announced yesterday that it recorded a net profit of RM31.38 million in the first quarter ended March 31, 2016 (1QFY16), an increase of 10.14% from RM28.49 million the year before (1QFY15), mainly due to higher gross profits in line with the increase in its volume of gas sold.

Revenue rose 26.19% to RM961.04 million, from RM761.59 million, mainly due to higher volume of gas sold and the upward revision of natural gas tariff, Gas Malaysia said in its bourse filing.

“As we look to 2016, we remain cautiously optimistic. We have rigorously laid out the foundation for the three new businesses to strengthen the group’s future growth.

“To this end, a five-year business plan has been formulated, with the aim to take natural gas beyond the ambit of regulated business and diversify its use by creating new demand on more commercially driven platforms,” added Ahmad Hashimi.

Gas Malaysia closed down five sen or 2.13% at RM2.30 yesterday, valuing it at RM2.97 billion.

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