This article first appeared in The Edge Financial Daily on June 27, 2018
KUALA LUMPUR: T7 Global Bhd is keen to continue participating in the controversial East Coast Railway Link (ECRL) project even at a substantially lower cost as long as the group “can make a decent profit” from it, said its executive deputy chairman Tan Sri Tan Kean Soon.
On Monday, Prime Minister Tun Dr Mahathir Mohamad said the Pakatan Harapan government will proceed with the ECRL if it can obtain more favourable terms through renegotiation and the project’s cost is lowered from the current RM55 billion.
T7 chairman Datuk Seri Dr Nik Norzrul Thani said the group will have to wait for the government’s decision on the project as it is being reviewed, although the group is positive that the pricing will be more effective going forward.
“What we’re happy now is the group, fundamentally strong, will have a good chance. Pricing is also very important. For that, we must make sure we’re efficient. We’re quite enthusiastic about some of the reviews because we have always been competitive. We have never relied on government contracts,” he told reporters after the group’s annual general meeting yesterday.
He added that if the ECRL were to proceed as planned, there will be spillover effects for some Terengganu players — the objective even before the 14th general election that saw a change in administration.
On March 14, T7 entered into a new memorandum of understanding (MoU) with Terengganu state-linked Eastern Pacific Industrial Corp Bhd (Epic) and CMC Engineering Sdn Bhd, a wholly-owned bumiputera company, to form a consortium to undertake the construction of the ECRL project’s Terengganu parcel. The MoU had excluded China State Construction Engineering (M) Sdn Bhd whose role was as the technology partner in a previous MoU signed on Oct 20 last year.
While awaiting the government’s decision on the ECRL, Nik Norzrul said T7 will focus on three divisions going forward and will not be too dependent on a single sector to ensure
sustainability of its revenue growth.
“We hope to have three different businesses — oil and gas (O&G), aerospace and high value manufacturing, as well as infrastructure development, which will be developed together at the same pace. We don’t expect one to outdo the others.
“Of course for infrastructure development, it will have big-ticket items. What we don’t want to do is to rely on anything. We want to go on three major wings of the revenue stream.”
He also said the group has a strong balance sheet as gearing level remains comfortable, and that T7 will not be overly aggressive in search of growth.
As of March 31, 2018, the group’s net gearing stood at 0.18 times, indicating there is still room for it to tap into borrowings if there is a need to do so.
Nik Norzrul said the worst is over for T7 after returning to the black since the financial year ended Dec 31, 2016 (FY16). In the first quarter ended March 31, 2018, T7 recorded an 85.7% increase in revenue to RM55.5 million. Its net profit jumped 7.5 times to RM1.93 million.
Currently, the group’s revenue is derived mainly from the O&G segment, consisting about 90% of the sum, with the remaining from the construction segment.
Tan noted its aerospace or high level manufacturing segment had yet to officially kick-start, with construction work still ongoing.
“Our factory is still under construction. By year end, it will be ready and operational. Hopefully by early next year, we should start getting some contracts,” he said.
On Berjaya Corp Bhd founder and executive chairman Tan Sri Vincent Tan Chee Yioun’s emergence as a substantial shareholder of T7 with a 5.04% stake as at May 16, and if any potential collaboration is expected going forward, Nik Norzrul said the management is open to any opportunities but nothing is firm for now.