Instacom slips into losses in 3Q

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KUALA LUMPUR (Nov 28): Telecommunication towers builder Instacom Group Bhd reported a net loss of RM2.02 million in its third quarter ended Sept 30 (3QFY14), from net profit of RM7.82 million a year earlier.
This resulted in a loss per share of 0.29 sen, against earnings per share (EPS) of 1.11 sen in the previous corresponding quarter.
In its explanatory note to Bursa Malaysia today, Instacom (formerly known as I-Power Bhd) said the weaker result was due to lower margin contributed from its civil, mechanical and electrical works (CME) segment.
On top of that, it said it remains obliged to service its fixed cost despite the reduction in revenue, which resulted in a situation whereby its costs outran its revenue.
Instacome's 3QFY14 revenue more than halved to RM11.81 million, a 67.6% decline from RM36.44 million in 3QFY13.
In the nine-month cumulative period (9MFY14), the group’s net profit dropped 81.23% to RM4.19 million from RM22.33 million in the previous corresponding period; while revenue halved to RM51.89 million, about 49.6% from RM102.95 million in 9MFY13.
EPS thus contracted by 81% to 0.6 sen in 9MFY14 from 3.18 sen in 9MFY13.
The group's share price eased one sen or 5.41% to 17.5 sen today, with 1.75 million shares done, giving it a market capitalisation of RM122.89 million.
The counter has mostly been trending downward since the beginning of the year. It touched a low of 17 sen in mid-October; its highest was at 29 sen in late February. 
Moving forward, Instacom is banking on a tender to build 400 telecommunication towers that will be called by the Malaysian Communication and Multimedia Commission, which will amount to about RM300 million.
“It is anticipated that the awards shall be made by early 2015, with construction expected to commence in early 2015,” Instacom said.
It should be noted that the group had in early October proposed to acquire a 35% stake in Neata Aluminum (M) Sdn Bhd for RM58.8 million.
Based on its filing then, the purchase price is to be fully satisfied by the issuance of 309.47 million new shares of 10 sen each in Instacom, at an issue price of 19 sen apiece.
With the acquisition of Neata, Instacom has proposed to diversify its existing activities to include aluminium design and fabrication as well as civil engineering and construction.
Subsequent to that proposal, Instacom saw 10.24 million shares, representing a 1.4% stake, traded.