KUALA LUMPUR: Media and IT solutions outfit PUC Founder (MSC) Bhd is all geared up to diversify into the renewable energy sector, following an acquisition of a 4.3-acre (1.74ha) tract in Kedah last month on which it intends to build a solar farm for not more than RM10 million.
Through its subsidiary Founder Energy Sdn Bhd, PUC Founder acquired the industrial land in Kedah for slightly more than RM1 million, its managing director Cheong Chia Chieh told The Edge Financial Daily in a recent interview.
The ACE Market-listed firm plans to bid for a 1mw Feed-in Tariff (FiT) quota from the Sustainable Energy Development Authority Malaysia (Seda) next Jan 26, via its subsidiary Maxgreen Energy Sdn Bhd. Maxgreen was previously known as Ausscar Group Sdn Bhd.
“We will announce the news if we get the FiT quota from Seda,” said Cheong. He noted that the group could potentially garner an internal rate of return (IRR) of 10%, with revenue of RM1.3 million and a profit before tax (PBT) of RM1 million annually from its proposed solar project.
Maxgreen was created on Nov 13 after PUC Founder renamed its insurance marketing services arm Ausscar Group to reflect a change in its business model.
“We felt the result [of the business] was not looking positive and that was why we transformed the business model.”
If the FiT bid is successful, Founder Energy, as the business owner, would lease the land to Maxgreen, which would be the solar power plant operator, he said.
“When we have more spare cash from the recurring income stream, we will invest in the [same] business,” Cheong said, adding that the solar energy business could garner a return on investment that spans 21 years.
PUC Founder is not the only firm that is bullish on the renewable energy business. PVC sheeting manufacturer Tek Seng Holdings Bhd had ventured into the solar photovoltaic cell manufacturing business back in 2012, through its 86.1%-owned TS Solartech Sdn Bhd.
Last Thursday, stainless steel cookware manufacturer Ni Hsin Resources Bhd too joined the renewable energy bandwagon after it inked a memorandum of understanding with Helios Photovoltaic Sdn Bhd, which might involve the eventual acquisition of Helios by Ni Hsin.
“If we don’t get the bidding, we will continue to seek for [renewable energy] opportunities. We can also invest in companies that have secured the bidding, or we can build a warehouse or a factory and rent it to others,” Cheong said.
Moving forward, the group intends to focus on not one but three businesses, namely, renewable energy, financial services, and technology, media & telecommunications. The company aims to spread its eggs into several baskets due to the uncertain impact of the goods and services tax (GST).
“We do not know what the impact will be. That is why we need to grow other revenue streams to mitigate any negative impact of the GST,” he said. Besides the anticipated solar power business, new revenue would be generated from its online-to-offline service and its e-payment service.
The group is still in the midst of realigning its business and reviewing its subsidiaries, said Cheong, following the completion of a reverse takeover of the group by London’s AIM Market-listed Resource Holding Management Ltd in January.
“If we feel that the activities of our subsidiaries are not as good as before, we will either dispose of them or rename [and restructure] them for other activities,” he said.
He noted that PUC Founder would be transferred to the main market when the time is right. At the moment, Red Hot Media International Ltd owns 57.44% of PUC Founder.
PUC Founder’s net profit for its third quarter ended Sept 30, 2014 (3QFY14) was RM2.8 million, more than nine times the RM280,000 it recorded in 3QFY13. Revenue for 3QFY14 has also almost doubled to RM9.2 million from RM4.7 million in the previous corresponding quarter.
This article first appeared in The Edge Financial Daily, on December 15, 2014.