This article first appeared in The Edge Malaysia Weekly on June 12, 2023 - June 18, 2023

CITAGLOBAL Bhd, which is involved in civil engineering, renewable energy and telecommunication infrastructure construction, is acquiring 60% stakes in two companies that provide solar energy engineering and installation for government agencies.

According to Citaglobal president and executive chairman Tan Sri Norza Zakaria, the two companies have the potential to secure RM300 million worth of solar panel engineering, procurement, construction and commissioning (EPCC) contracts from various government agencies.

Based on a document sighted by The Edge, Citaglobal had on June 7 entered into a binding term sheet with Nik Ahmad Huznee Nik Hussain, his sons Nik Fadhlee and Nik Mohd Umar, as well as Nova Spectra Energy Sdn Bhd (NSE), for the acquisition of 60% equity interest in Nova Reeco Sdn Bhd and Spectra Suria Sdn Bhd.

Citaglobal will pay RM2 million and RM3 million in cash for the stakes in Nova Reeco and Spectra Suria respectively, the document reveals.

“These two acquisitions represent a big step for Citaglobal into the renewable energy space. First, these are earnings-accretive acquisitions as both companies will give us a target order book of some RM300 million.

“Secondly, it gives Citaglobal the Registered Solar Photovoltaic Investor status, which allows Citaglobal to act as an asset owner, provide power purchase agreements and solar leasing arrangements and services to government-linked companies and the government,” says Norza.

This will become a new income stream for Citaglobal, he adds.

According to the binding term sheet signed by Citaglobal and the vendors that was sighted by The Edge, Citaglobal has expressed its desire to invest a total of RM12 million, of which RM9 million is for Nova Reeco while the balance is for Spectra Suria.

The investment in Nova Reeco may be formalised via a combination of share acquisition and shareholders’ advances, and/or other forms of equity investment to meet bank funding requirements.

Nik Ahmad Huznee, Nik Fadhlee and NSE — the Nova Reeco vendors — have represented that NSE had secured and executed a concession agreement with Lembaga Kemajuan Ikan Malaysia (LKIM) on March 31, 2022, with a tenure of 21 years.

They undertake that the concession for Project LKIM will be novated to Nova Reeco from NSE as a condition precedent for the proposed acquisitions, the term sheet reads.

The vendors also irrevocably undertake that Nova Reeco shall be the asset owner for Project LKIM and all the future projects, while Spectra Suria shall be the EPCC for the project and all future projects secured by Nova Reeco.

“This (Project LKIM) also builds the recurring income base for Citaglobal moving forward,” says Norza.

Apart from the concession with LKIM, NSE has also been awarded solar EPCC contracts by Urusharta Jamaah Sdn Bhd, the Federal Agriculture Marketing Agency and Malaysian Prison Department.

Citaglobal has been actively securing contracts this year.

On March 6, the group announced that its wholly-owned subsidiary Citaglobal Engineering Services Sdn Bhd (CESSB) had received and accepted a letter of intent (LoI) to undertake engineering, procurement and construction works for Mutiara Perlis Sdn Bhd for the development of the Sanglang Integrated Jetty project in Perlis.

The entire project is divided into four phases, with the first — Phase 1A — having a contract sum of RM200 million.

The project will provide jetty facilities for the berthing of merchant ships, luxury cruise ships and yachts, deep-sea fishing and oil and gas vessels, as well as provide maintenance, repair and overhauling services for merchant ships.

On May 9, Citaglobal announced that CESSB had accepted a letter of award (LoA) for works on the Klang Valley Electrified Double Track Phase 2 (KVDT2) project amounting to RM261 million, from Dhaya Maju Infrastructure (Asia) Sdn Bhd.

CESSB’s scope of work for the KVDT2 project includes the supply, delivery, construction, successful completion and maintenance of bridges, culverts, drainage and fencing works. The project, which commences on June 1, will be completed within 36 months of the commencement date.

On June 1, the group announced that CESSB had accepted an LoA from Port Dickson Power Bhd as the contractor for the decommissioning, dismantling, demolition and disposal of the balance of a plant at the Port Dickson power plant for a lump sum of RM13.3 million.

These contracts bring Citaglo­bal’s order book to over RM1 billion.

The Yang di-Pertuan Agong Al-Sultan Abdullah Ri’ayatuddin Al-Mustafa Billah Shah has been increasing his stake in Citaglobal over the last one month.

Between May 24 and June 6,  His Majesty acquired a total of 6.84 million shares in Citaglobal, growing his stake in the group to 7.97%, from 6.51%. The King remains the second largest shareholder of Citaglobal behind Norza, who has a 39.25% stake, held directly and indirectly through TIZA Global Sdn Bhd.

Citaglobal has also been eyeing contracts for the East Coast Rail Link (ECRL). In December 2022, a 50:50 joint venture between the group and Reneuco Bhd (formerly KPower Bhd) received and accepted an LoI to become the independent power producer for the project.

In an exclusive interview with The Edge in January, Norza said the group was eyeing exclusivity of electricity supply for the entire ECRL line, including for the accelerated demand that may arise from the development of industrial facilities along the line.

However, this contract has yet to be finalised by the project owner Malaysia Rail Link Sdn Bhd and Cita­global-Reneuco. If Citaglobal-Reneuco manages to secure the exclusivity of supply for the ECRL, it would be a major boost for both groups.

In the first quarter ended March 31, 2023, Citaglobal registered RM2.07 million in net profit, which was 1.9% lower than the RM2.11 million it posted a year ago as revenue declined by 16.35% to RM38.24 million.

Its earnings per share almost halved during the quarter to 0.55 sen, from one sen in the same period a year earlier, owing to a wider share base following the issuance of 736.8 million new ordinary shares to Norza for the acquisition of CESSB. The exercise made him Citaglobal’s largest shareholder last November.

Citaglobal’s share price appreciated by 7.35% from May 30, when the first-quarter results were announced, to RM1.46 on June 2, before falling again. Last Thursday, Citaglobal closed at RM1.38 per share, valuing the group at RM576.2 million.

Year to date, Citaglobal’s shares have declined by 4.8%. Over the last 52 weeks, they have been trading between 85 sen and RM1.95. Over the last one year, the counter has appreciated by almost 44%. 

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