KUALA LUMPUR: Taliworks Corp Bhd, which has a high-powered board, is in for an exciting time ahead. The company’s joint venture with the Employees Provident Fund (EPF), TEI Sdn Bhd, will be the platform for Taliworks to spread its wings in the local infrastructure and utilities scene. It, indeed , aims to gain a presence in the power generation sector.

Taliworks executive director Ronnie Lim Yew Boon said the group is eyeing assets in waste management, toll roads and power generation.

Lim is excited about TEI Sdn Bhd, in which Taliworks holds a 51% stake and the EPF 49%.

Taliworks is currently grouping its mature and stable operating infrastructure assets with predictable cash flows to be injected into TEI.

“We are leveraging on our deal structuring and sourcing abilities and TEI’s shareholder’s financial muscle to bid for big projects. We have big plans in the areas of waste management, toll roads, power generation, be it in Malaysia or other developed countries including Australia,” he told The Edge Financial Daily in an interview.

To date, Taliworks (fundamental: 1.3; valuation: 2.4) has injected RM546 million worth of assets into TEI’s wholly-owned subsidiary, Cerah Sama Sdn Bhd.

“These are mature operational infrastructure assets, yielding revenue with minimal uncertainties as the EPF’s mandate to us is that their hurdle rate is a minimum 12% equity IRR (internal rate of return) and 6% dividend yield.

“Together with EPF, we will go and acquire more assets,” said chief investment officer Kevin Chin, adding that the size of each of the assets Taliworks is eyeing could be anywhere between RM500 million and RM1 billion.

Taliworks is now evaluating these projects and hopes to secure them within the next six months.

Taliworks has gathered a high-powered board in its pursuit of new assets. Two of its directors, for example, are experts in power generation — former Malakoff Corp Bhd managing director Ahmad Jauhari Yahya and former investment banker Vijay Vijendra Sethu, who was previously a board member of Malakoff.

Taliworks surprised investors with the recent appointment of Ahmad Jauhari and former Economic Planning Unit director-general Raja Datuk Zaharaton Raja Zainal Abidin as non-executive directors of the company.

The addition of these corporate and public sector heavyweights strengthens Taliworks’ already impressive board — which includes former housing and local government minister Tan Sri Ong Ka Ting as Taliworks chairman.

“We hope to achieve double-digit net profit growth moving forward through organic growth and future acquisitions,” said Lim, adding that its merger and acquisition activities will enable the company to yield a stronger net cash flow, hence more generous dividends.

Taliworks aims to be a company that offers good dividend and growth prospects. It has a dividend policy of distributing 75% of its net profit (normalised earnings) to shareholders. Year-to-date, it has announced a total dividend of 10 sen per share.

Also a boon to Taliworks is the positive progress in Selangor’s water consolidation efforts.

“We are optimistic the Selangor and federal governments will move on with their water projects … projects we are eyeing include various water infrastructure improvement and flood mitigation projects,” Lim said.

He noted that Taliworks had successfully clinched one third of the water projects it bid for in the past, thanks to its strong track record as a water treatment specialist.

Its parent company, LGB Bhd, has its beginnings as a specialist in water construction projects, from solid waste management to water operations and hospital services.

“Most of the water supply projects in Selangor were at one point either built or operated by the LGB group,” said Lim.

He added that Taliworks is also keen on bidding for non-revenue water projects in the various states. It currently has a construction tender book of RM1.2 billion to RM1.5 billion.

The resolution of Selangor’s water impasse means that Taliworks would be able to hasten the recovery of the outstanding amount of RM373 million owed to it by Syarikat Pengeluar Air Sungai Selangor (Splash), which was deferred as a result of the impasse.

Taliworks’ wholly-owned subsidiary — Sungai Harmoni Sdn Bhd — manages, operates and maintains Splash’s Sungai Selangor Phase 1 water treatment facilities.

In the first quarter ended March (1QFY15) Taliworks’ net profit jumped more than four times to RM15.03 million from RM3.75 million, mainly due to the reversal of provision for discounting on the deferred payment by Splash.

Revenue was 28.3% higher at RM97.02 million from RM75.60 million in the previous corresponding quarter, on higher contribution from both its construction and waste management segments, as well as consolidation of financial results from the Cheras-Kajang Highway.

Taliworks is also involved in the highway management business, with concessions for both the Cheras-Kajang Highway and the New North Klang Straits Bypass Expressway. It is looking at an annual 2.5% to 3.5% traffic growth for its highways moving forward, barring toll rate hikes.

According to Lim, the completion of upgrades of its wastewater treatment plants in China would improve the utility division’s performance, as tariff rates would almost triple upon the completion of each of its plants.

As for its water treatment business, he said Taliworks is looking to expand the capacity of its plants in Selangor and Langkawi due to rising demand for treated water in the two states.

Taliworks’ share price has been on a steady climb since August last year. The stock has nearly tripled from RM1.10 a year ago to RM3.08 last Thursday, bringing a market capitalisation of RM1.32 billion.

This article first appeared in The Edge Financial Daily, on July 20, 2015.