Friday 29 Mar 2024
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KUALA LUMPUR: Environmental engineering consultancy firm Progressive Impact Corp Bhd, which saw its 20-year air and water pollution monitoring concession with the government turned into an annual renewal contract for the next five years, aims to push three new technologies into becoming its main income contributors to reduce its dependency on government jobs.

The move came after its RM24 million per year concession with the government — that was signed in 1995 and operated by its wholly-owned unit Alam Sekitar Malaysia Sdn Bhd — ended on April 15. The concession was for Progressive Impact to monitor air and water quality at 60 stations nationwide.

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Under the original concession agreement, the government had the option to renew the contract, annually, for the next five years, which it did — for one year to April 13, 2016 — after renegotiating the contract down 8.3% to RM22 million per year. 

Income from the concession agreement contributed to about 50% of the group’s total annual turnover, followed by laboratory testing services (42%) and waste management (8%).

In an interview with The Edge Financial Daily, Progressive Impact group chief executive officer Johar Yusof acknowledged that there is always the risk that Progressive Impact won’t get the next yearly renewal, which is why the company is banking on the three new technologies, together with its laboratory testing services business, to maintain and boost its earnings, going forward.

The three technologies are predictive greenhouse gas emission monitoring system, hybrid waste water and wave glider.

While the name of the first product is self-explanatory, the hybrid waste water is a sewerage treatment plant that turns sludge and effluent from residential and industrial waste (like palm oil, paper mill and rubber factories) into reusable effluent for farming and other purposes, which can also be safely disposed of on land or in the ocean. On the other hand, the wave glider is an autonomous ocean monitoring system that can collect various data for scientific, commercial and military applications.

Johar said the group is eyeing to bid for long-term environment-related concession contracts that utilise either one or all its three technologies.

“These are game-changing technologies in the environmental industry that have been approved by the authorities like the Department of Environment and National Water Services Commission. We have also received many enquiries from our customers. We believe the technologies will be earnings-accretive to us this year,” said Johar.

Already, Johar said the company is about to receive bulk orders for its hybrid waste water technology in Iskandar Malaysia, Johor, as well as the East Coast Economic Region and Northern Corridor Economic Region.

However, he declined to specify how much the company expects the new technologies to contribute to its revenue for the financial year ending Dec 31, 2015 (FY15).

Meanwhile, Progressive Impact’s second-largest revenue contributor — laboratory testing services — is operated by its 59%-owned unit ALS Technichem (M) Sdn Bhd, a joint venture with Australia’s Campbell Brothers Ltd, which has 90 laboratories in 25 countries.

ALS Technichem provides chemical testing to various industries, whose products include food, pharmaceuticals, tribology, minerals and coal.

As for the waste management business, it is operated by its 90%-controlled Alam Sekitar Eco-Technology Sdn Bhd, which constructs sewage treatment plants.

Johar also expects to widen Progressive Impact’s environmental monitoring portfolio to include energy, oil and gas, petrochemicals, water resources management and construction players.

“Currently, we monitor the water quality of Putrajaya Lake and also a refinery plant in Terengganu. This gives us credibility to move into other segments,” he said.

Johad added that the company also plans to expand its overseas business to other Middle Eastern countries from its current operations in Mecca, Saudi Arabia, and Indonesia — both these countries make up the total of its overseas revenue contribution of 30%.

In Saudi Arabia, the company, via its 70%-owned unit Saudi Asma Environmental Solutions LLC, provides environmental consulting services. In Indonesia, its 80%-owned unit PT ALS Indonesia offers laboratory testing services.

“We are working with an international consulting company to quicken our pace by exploring other potential markets,” he said.

For FY14, Progressive Impact’s net profit fell 47% to RM8.44 million from RM15.84 million for FY13, on losses in its waste management operation, due to lower margins from higher construction costs. Revenue slipped 13.3% to RM83.99 million on lower income from its Saudi Arabia operations, after the completion of certain projects.

It had a cash pile of RM40.3 million as at March 31, with almost negligible borrowings.

“We are very prudent in managing our costs and expenses. We do not discount the opportunity for inorganic growth, particularly in acquiring companies that are still at a growth level. But valuations must be sensible, with relevant synergy that can be derived,” he said.

Progressive Impact (fundamental: 2; valuation: 1.4) is controlled by executive deputy chairman Zaid Abdullah and his family via Zaiyadal Keluarga Sdn Bhd, with a 53.53% stake, while pilgrim fund Lembaga Tabung Haji is the second-largest shareholder with a 9.88% interest.

The stock rose 21.6% from 18.5 sen on Dec 17, 2014 to close at 22.5 sen last Friday, with a market capitalisation of RM148 million.


The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.

 

This article first appeared in The Edge Financial Daily, on June 15, 2015.

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