This article first appeared in The Edge Malaysia Weekly on March 22, 2021 - March 28, 2021

HAVING reversed the losses at rebuilt commercial vehicle manufacturer Boon Koon Group Bhd — now Chin Hin Group Property Bhd (CHGP) — low-profile businessman Datuk Seri Chiau Beng Teik and his eldest son Chiau Haw Choon are now taking on something new.

About two weeks ago, it was announced that CHGP was looking to diversify into construction by acquiring a 45% stake in Aima Construction Sdn Bhd — a construction outfit from Alor Setar, Kedah — from the Khor family for RM31.5 million. The proposed acquisition, which is expected to be completed by the third quarter of this year, will be fully satisfied with an issuance of up to 35.8 million new shares in CHGP at an issue price of 88 sen each.

Those who are familiar with the Chiau family that controls Chin Hin Group Bhd — a home-grown building material specialist that made its debut on Bursa Malaysia in 2016 — should know that CHGP’s plan to acquire the construction firm is by no means a simple acquisition or a plain move to diversify.

The father and son are already thinking ahead for CHGP and Aima Construction. A particular point of reference can be made of Solarvest Holdings Bhd, a solar energy solution provider that was listed on the ACE Market in November 2019.

Chin Hin Group was a pre-initial public offering (IPO) investor of Solarvest, with a 45% stake between August 2017 and November 2019. But after the IPO and several share divestments, its stake was reduced to 27.2%, making it the second largest shareholder as at June 26 last year.

In an interview with The Edge, CHGP executive director Haw Choon reveals that his endgame is to have Aima Construction ready for an IPO in the next three to four years. “We want to replicate what Chin Hin Group did with Solarvest,” he says.

“When the owners of Aima Construction looked at our track record at Solarvest and how we transformed Boon Koon into CHGP, they were confident that we could bring them to the next level. That’s why the Khor family is willing to let go of almost half the company while retaining the rest.”

Beng Teik is the major shareholder and non-executive chairman of CHGP. Haw Choon, 37, is group managing director of Chin Hin Group, which is in the midst of acquiring a controlling 51.5% stake in CHGP from the Chiau family.

Haw Choon says Aima Construction is currently focusing on building houses, but it is not involved in infrastructure works yet. “Our idea is to grow the company via a merger and acquisition (M&A) because it has a good balance sheet with a strong cash position.”

CHGP plans to use the construction firm to acquire an infrastructure company in the next six months, in a move to make the builder’s business sexier. “With our networks in the property and building material sectors, I really think we can add value to Aima Construction. Our target order book upon submission of IPO is RM700 million in the next three years,” he says.

It is learnt that Aima Construction’s current annual revenue is between RM100 million and RM200 million.

“In the next three years, we hope that Aima Construction and the infrastructure company to be acquired can collectively generate a profit of RM10 million. By then, they should be ready for an IPO,” says Haw Choon.

Aima Construction managing director Khor Ken Yeon also sees synergistic benefits from the proposed acquisition. “[On] CHGP’s plans to launch RM3.73 billion worth of projects in the coming years, we expect to see significant participation from our end, as construction work on properties has been our forte for several decades,” he points out.

Khor highlights that Aima Construction, which specialises in mid-rise buildings and landed properties, has completed RM1.7 billion worth of construction jobs since it was founded 35 years ago. Today, most of its projects are in the Klang Valley and its clients include the likes of Gamuda Bhd, S P Setia Bhd and Sime Darby Property Bhd. Its total order book value currently stands at RM320 million.

“We are now one of the most active construction players in the market, with key involvement in multiple townships and developments in the Klang Valley,” he adds.

Khor says that together with CHGP, he wants to grow Aima Construction into a full-fledged builder that covers housing, buildings and infrastructure projects. “We plan to hire young engineers and talents so that the company has the capability to build high-rise properties too. Through the ‘marriage’, we can tap into CHGP’s vast property and construction industry networks to boost our construction order book.”

With CHGP’s projects having a total gross development value (GDV) of RM4 billion, Khor estimates that there will be RM2 billion worth of construction works, which will be partly undertaken by Aima Construction. “Obviously, being an associate company of CHGP, we will be granted the right of first refusal for its projects. Of course, we will be bidding for our own projects as well,” he adds.

“Besides, we can also source building materials from Chin Hin Group, which will provide some cost savings and result in our business and services being more competitive. I would say there are a lot of synergies to be derived from this acquisition and we are anticipating a new high together.”

Meanwhile, Haw Choon says his intention is to make CHGP a property and construction group.

Over the past six months, the company has been actively beefing up its land bank. In February, it announced plans to acquire 81.9 acres of land in the Klang Valley for RM268 million, on which it would develop five projects with a combined GDV of RM3.73 billion over the next two years.

“We also intend to inject another joint-venture property project into CHGP, which will bring our total GDV to RM4 billion. This will keep us busy over the next two to three years. Given the clear earnings visibility of CHGP, we hope investors will pay a bit more attention to our stock,” says Haw Choon.

He points out that CHGP aims to be one of the major property developers in town, with a market capitalisation of RM500 million to RM700 million in the next three years. Currently, it only has two ongoing projects, namely Aera Residence and 8th & Stellar.

Haw Choon acknowledges that the company’s financial performance has been rather lumpy as it has not launched new projects every year. “Going forward, we will have enough land bank to launch new projects more frequently. And hopefully, within the next three years, we can achieve stable earnings of about RM50 million a year, based on a profit margin of 20% and revenue of RM200 million to RM250 million,” he says.

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