KUALA LUMPUR (July 13): Mestron Holdings Bhd, whose net profit for its financial year ended Dec 31, 2022 (FY2022) almost tripled year-on-year, is optimistic of an even better year ahead as it sees visible growths and further catalysts in all three of its business segments, with possibly a record turnover for its second quarter ended June 30, 2023 (2QFY2023).
The group’s executive director Gary Loon Chin Seng said its lighting and pole segment — Mestron's core business — has seen an average of purchase orders amounting to RM10 million each month.
As at the end of the first week of July, Loon said Mestron’s outstanding orders for the segment — where orders are typically completed in three to four months — are estimated at RM80 million to RM100 million, translating to about eight to 10 months of future sales volume.
“Bear in mind, we are still getting new purchase orders everyday,” the 47-year-old told The Edge at the conclusion of the group's extraordinary general meeting recently, highlighting the “aggressiveness” of demand for lighting and poles.
As a supplier for ongoing projects such as the Pan Borneo Highway, West Coast Expressway, Central Spine Road and the Kota Bharu-Kuala Krai Highway, he said there was a strong revitalisation in the business following good highway development progress with the easing of the Covid-19 pandemic.
The group has also supplied some of its products to Tenaga Nasional Bhd’s (TNB) advanced metering infrastructure project, which aims to install smart metering in 9.1 million households in Peninsular Malaysia by 2026 and requires 100 monopoles per month for 6,000 TNB substations.
Besides that, Mestron said it has a strong presence in private developments such as Serenia City and City of Elmina by Sime Darby Property Bhd, Eco Majestic and Eco Sanctuary by Eco World Development Group Bhd and Gamuda Cove by Gamuda Bhd.
Mestron, incorporated in 2002, started venturing into the telecommunication (telco) segment in 2017. Loon said the group has so far secured orders for about 200 telco towers under phase one of the Jalinan Digital Negara (Jendela) programme that seeks to enhance the country's 4G network capabilities.
“We were a major supplier for the phase one of Jendela implementation and phase two is starting up by the end of this year. So there will be another round of demand,” Loon said.
The group was also involved in the initial stage of the 5G network implementation, said Loon, who believes Mestron stands a good chance to be one of its major infrastructural suppliers to provide high mast lightings and telco monopoles.
With the government’s introduction of a dual network model for 5G roll-out, Loon expects Mestron’s telco business to see a "second boom”.
As for its third segment, the renewable energy (RE) business that it ventured into in 2021, Loon said Mestron’s investment in a 2MW biogas power plant in Gua Musang, Kelantan has been completed and is now pending approval for its commercial operation date from the Sustainable Energy Development Authority (Seda).
“We are targeting to start supplying to TNB from this month. In fact, it has been postponed for two months due to some technical issues,” Loon said, but did not elaborate.
Mestron’s biogas plant has a 21-year power purchase agreement with TNB at a rate of 39 sen plus per kWh. The plant is projected to contribute an annual profit after tax of RM3 million on a revenue of RM6 million — based on full capacity — from 2024 onwards.
Mestron posted a net profit of RM9.43 million for its FY2022, about three times FY2021's RM3.21 million, as revenue jumped 92.22% to RM112.16 million from RM58.35 million, thanks to increased demand for pole and outdoor lighting products. Its lighting and pole segment contributed 69.87% of Mestron’s FY2022 revenue, followed by the telco segment at 22.16% and the RE business at 7.98%, primarily from its solar energy business.
For its 1QFY2023 ended March 31, 2023, Mestron’s net profit about doubled to RM2.54 million from RM1.38 million a year ago, as revenue grew 25.64% to RM26.9 million from RM21.41 million, driven by the sale of its specialty and telco poles.
Loon said the group's overall profit margin is about 10%, with the telco segment providing the highest profit margin of 15% to 20%.
Meanwhile, despite the intensity of ongoing demand, Loon said Mestro's manufacturing plant in Puchong, Selangor, is running under-capacity due to the limited capability of its in-house machinery.
“There are still a lot of processes that depend on manual labour, which we are trying to cut down for a more automated process, and which in turn provides a better quality control system,” he said.
Loon also said Mestron has not been impacted much by changes in steel prices for its pole making business, nor has it been affected by the weakening of the ringgit.
“We are able to react very fast if there are any changes to steel material price due to the short turnaround time of our orders. Whenever there is an increase of raw material prices, we pass the cost over to the customers,” he said. “We also make sure that we are able to secure our supply in the next six months. Most of Mestron’s raw materials are sourced locally, but we do have some importation from China. And so far, the ringgit versus renminbi is very stable.”
At the EGM, the group obtained its shareholders' approval to amend the group's constitution to transfer its listing on the ACE Market — where it debuted in 2019 — to the Main Market of Bursa Malaysia by November this year, which it believes will accord the group greater recognition among investors.
Mestron shares closed unchanged at 43 sen apiece on Thursday, giving the group a market capitalisation of RM424.9 million. The group's share price has appreciated over 26% in the past one year.