Monday 22 Jul 2024
By
main news image

This article first appeared in The Edge Malaysia Weekly on December 4, 2023 - December 10, 2023

SARAWAK Consolidated Industries Bhd (SCIB) appears to be back on the radar of investors following some boardroom changes, and the departure of Datuk Mohd Abdul Karim Abdullah as a shareholder.

Since June, the counter has posted a gain of nearly 300% as investor interest returned to SCIB.

SCIB had been associated with financially troubled Serba Dinamik Holdings Bhd as both companies had Abdul Karim as a common shareholder, and it appears his exit has benefited SCIB.

Even so, corporate observers expect that it will take at least a year for SCIB to further tidy up and to implement some corporate manoeuvres.

As a Sarawak company, investors are keen to see if SCIB can benefit from the so-called “Sarawak Theme” as Putrajaya has allocated some RM5.8 billion in development funds to the state under Budget 2024 for major ongoing infrastructure projects such as the Sabah Pan-Borneo Highway and Sarawak-Sabah Link Road.

Renewed interest in SCIB emerged when the company announced a slew of boardroom changes in the middle of the year. In June, Abang Abdillah Izzarim Abang Abdul Rahman Zohari, the son of Sarawak premier Tan Sri Abang Johari Tun Openg, was appointed executive chairman of SCIB.

At the same time, the company redesignated Ku Chong Hong as managing director from executive director after Rosland Othman stepped down from the position. Ku was previously the managing director of Bintai Kinden Bhd, having served a short stint of about five months before being redesignated as executive director last May. However, he left the Bintai Kinden board four months later.

Last Friday, Bursa Malaysia publicly reprimanded SCIB, Abdul Karim and Rosland, for failing to issue the company’s FY2021 annual report within the stipulated time frame. Abdul Karim and Rosland were fined RM27,000 each.

Last June, three directors of SCIB, namely Mohd Shakir Shahimi, Nuraiman Shaiful Annuar and Noor Azri Noor Azerai, resigned two days prior to an extraordinary general meeting to vote on the removal of the trio.

“It’s positive to see new board members with the appointment of the influential figure to the board, but we still need to monitor the performance of the new management team,” a market observer tells The Edge.    

With the continued roll-out of new infrastructure projects in Sarawak, he says investors are pinning their hopes on SCIB grabbing a share of the huge economic pie in the state.

At the time of writing, SCIB had not responded to The Edge’s queries on its plans going forward.

Shares in SCIB have surged five times year to date (YTD) to close at 77sen apiece last Friday, valuing it at RM493 million. After the Serba Dinamik saga emerged in 2021, SCIB’s share price started to head south and had tumbled to a low of 12 sen apiece by March this year, from a peak of nearly RM3 in January 2021.

The market observer is of the view that SCIB’s share price may have run ahead of its fundamentals, but states: “Yes, the jump in the share price is quite a lot, but if it could grab sizeable contracts in the future, then the current valuation will be justified.”

Citing Ibraco Bhd as an example, he observes that the Sarawak-based construction and property development firm enjoyed a spike in its share price after its partnership with China Railway Group Ltd clinched RM568.81 million worth of construction jobs for the Kuching Urban Transportation System project. Closing at  87.5 sen last Friday, Ibraco’s YTD share price is up  45.8%.

On a positive note, SCIB returned to profit in the first quarter ended Sept 30, 2023 (1QFY2024), after nine quarters of losses in a row. It registered a net profit of RM926,000 during the quarter under review against a net loss of RM871,000 in the same quarter a year ago, driven by better contribution from the manufacturing segment, as a result of a higher profit margin and sales volume of its foundation piles for the upgrading of roads, extension of factories and school projects in Sarawak.

Quarterly revenue expanded 29.9% to RM39.4 million from RM30.33 million previously.

In FY2023, its net loss narrowed to RM24.42 million against RM43.6 million in FY2022, on the back of losses at its construction and engineering, procurement, construction and commissioning (EPCC) segment, arising from impairment losses on trade and other receivables.

SCIB, which has a total outstanding order book of RM257.19 million, says it will continue to focus on its expansion towards sustainable growth, with a watchful eye on the evolving economic terrain.

Last Thursday, SCIB proposed a capitalisation of RM11.3 million in debt owing to Goh Hardware & Construction Sdn Bhd via the issuance of 18.5 million new SCIB shares at an issue price of 61.1 sen per share, representing a 20.6% discount to its closing price of 77 sen on the day.

Last September, SCIB completed a private placement exercise that raised total gross proceeds of RM12.76 million, the bulk of which was for the repayment of bank borrowings, and the rest for working capital.

As at end-September, SCIB was in a net debt position of RM25.9 million with RM40.4 million in gross borrowings.

SCIB’s shareholding is unique in that it does not have any controlling or even substantial shareholders. The largest shareholder — Natural Resources, Environment and Climate Change deputy minister Datuk Seri Huang Tiong Sii — only owns a 4.22% stake, followed by Lee Chee Hoon (3.49%) and Chan Yok Peng (3.12%).

SCIB, which manufactures precast concrete products, has three factories in Kuching with a wharf facility and capacity to supply 500,000 tonnes of building materials annually across Borneo.

It has set its sights on securing more EPCC projects, though it is currently busy with seven EPCC contracts involving infrastructure, schools, social amenities and residential building projects with a total contract value of RM353.26 million.

Last September, SCIB signed an agreement with Indonesian mass rapid transit operator PT MRT Jakarta Tbk to explore a potential partnership to develop a transport-orientated development in Jakarta. 

 

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's App Store and Android's Google Play.

      Print
      Text Size
      Share