KUALA LUMPUR (Nov 17): Kejuruteraan Asastera Bhd (KAB) is targeting significant growth in its sustainable energy solutions (SES) segment, with about 50% contribution to its bottom line in the coming years.
KAB managing director Datuk Lai Keng Onn said the SES segment's contribution to the group's bottom line will be at least 25% in the financial year ending Dec 31, 2022 (FY2022), before rising to 50%.
"SES is one of the businesses we really want to focus on, and we will grow that business. I think the profit margin in the SES segment is much better than in the engineering segment. We expect a profit margin of 15% to 25% in the SES segment.
“As for revenue contributions, we are looking at a steady growth from 20% to 40% [from the SES segment] in the next three to four years,” according to Lai.
The group still faces challenges in the engineering segment as raw material prices fluctuate, Lai noted at a virtual press conference on Thursday (Nov 17) after an extraordinary general meeting.
The group’s SES segment recorded revenue of RM6.8 million for FY2021. Then for the first half ended June 30, 2022 alone, revenue stood at RM8.2 million — surpassing the FY2021 figure — and is expected to grow exponentially going forward.
KAB's first-half net profit fell to RM1.24 million from RM2.95 million, although revenue rose to RM95.63 million from RM89.92 million a year earlier.
The growth in the SES segment will be supported by the recognition of potential concession revenue of more than RM500 million until 2046 from existing contracts in Malaysia and Thailand, as well as ongoing acquisitions.
Revenue generation will come from its growing asset portfolio in clean energy generation, renewable energy generation, and provision of energy-efficient solutions.
In addition to the existing SES business, Lai said the group is in discussions with asset owners as well as potential clients for more acquisitions and projects in Malaysia and regionally.
“The order book for the energy segment will be quite a huge jump with upcoming projects. We have a lot of energy projects in the pipeline,” he said.
Currently, the group’s estimated capital expenditure for existing contracts and potential projects amounts to RM52.3 million for solar photovoltaic projects of over 17,000 kWp in capacity, and RM220 million for clean energy projects of up to 65MW.
On another note, shareholders also approved KAB’s proposed private placement, representing approximately 20% of the group’s existing issued shares, to raise RM134 million for working capital and repayment of bank borrowings funding existing and future SES projects.
At Thursday’s noon break, shares in KAB had dipped 1.5 sen or 3.16% to 46 sen each, giving the engineering and energy solutions provider a market value of RM823.01 million. The stock has jumped 84% year-to-date.