Thursday 28 Mar 2024
By
main news image

This article first appeared in The Edge Financial Daily on July 1, 2019

KUALA LUMPUR: T7 Global Bhd, which has been in the news for expressing its interest in East Coast Rail Link (ECRL)-related infrastructure jobs, has passed the pre-qualifying stage.

The group is now preparing to bid for contracts beginning with the Pahang portion of the 640km railway project which may be awarded before year end, said its executive deputy chairman Tan Sri Tan Kean Soon (pic).

“It is still a long journey,” Tan said. “There are 40% of the jobs for local companies that are [worth] around RM17 billion.

“Through our discussions with the main contractor (China Communications Construction Co Ltd) we hope for some good news towards the end of the year,” Tan said in an interview with The Edge Financial Daily.

“Of course the margin may not be as high as previously anticipated with the cost reduction, but we believe it will still underline fair returns for everyone,” he added.

In fact, the hype around ECRL’s revival by the new government fuelled an upward trend in T7 Global’s share price to a high of 55 sen in early March. It has since then drifted lower to 44 sen last Friday. Still, it has gained 37.5% year to date from 32 sen.

T7 Global, whose core business is in the cyclical oil and gas (O&G) industry, has diversified into infrastructure development and aerospace.

The group made its maiden venture into the aerospace segment through a joint venture with UK-based aerospace company KOV Ltd.

Construction of T7 Global aeroplane parts manufacturing plant at UMW High Value Industrial Estate Park in Serendah, Selangor is completed, and it expects the plant to be fully operational by the first half of next year.

“We are halfway in terms of the certifications required,” said the company’s chairman Datuk Seri Dr Nik Norzrul Thani Nik Hassan Thani. “The two remaining certifications [should be obtained] by year end so we can be qualified to start production.”

The plant — part of a joint venture with KOV — is expected to generate revenue of around RM180 million annually at full capacity.

In the initial stage, T7 Global will operate the plant with one-third capacity. Through partnership with a Penang-based company, it will supply to a US client and indirectly to Boeing through a five-year contract.

The Serendah factory conducts secondary process for metal parts in airplanes before they are assembled into bigger components. This includes parts treatment, metal coating and painting, non-destructive testing and other chemical processes.

“Now we are looking at a few potential clients in Malaysia and in the region, mainly the US and European aerospace companies that are located here,” said Nik Norzrul.

“There is a commercial attraction to it,” assured Nik Norzrul. “We have received enquiries [from potential clients] before the factory was ready … at least we find that as positive,” he added.

Meanwhile, it is also collaborating with Marine Crest Technology Sdn Bhd to provide marine navigation system for both commercial and military vessels, although it is still at its infancy stage.

“We are hoping for these ventures to go through, and make good progress on oil and gas, which is our mainstay. That is our strategy.”

 

‘We are brisk walking’

T7 Global’s O&G business contributed to 88% of the group’s top line at RM186.1 million in the financial year ended Dec 31, 2018 (FY18).

The group provides maintenance services in the O&G sector. Along the way, it also works on offshore construction, as well as supply of specialised process equipment in the production subsegment.

“We have worked with the marquee brands, and from there we enhance our offerings to the customers,” Nik Norzrul said, referring to tie-ups with Honeywell and more recently, as the exclusive agent for Oliver Valves in the country.

“Market has been receptive towards our new expertise — for example the subsea engineering space which we are exploring now.

“In fact we already got a few jobs just to get the ball rolling,” he added, pointing to its 55% stake in an underwater subsea engineering services company with partners, Hong Kong’s DIV Diving Engineering Co Ltd and Singapore’s Cornerstone Offshore Pte Ltd.

At end-2018, the group’s order book in the segment stood at RM800 million, with a tender book of around RM2 billion.

Asked if more contracts are in sight, Nik Norzrul said: “Hopefully we have some good news next month … But it is still very competitive.”

It is competitive indeed — group-wide, margins remain an issue, with pre-tax profit margin still largely unchanged year-on-year at below 4% for the first quarter of FY19.

For now, the group intends to take it slow. “Minor mistake may turn from black to red, no doubt … But if we are efficient we can [work around it].

“We are still brisk walking. More importantly we are not losing money. We are growing, and we are not highly leveraged,” shared Nik Norzrul.

For FY18, T7 Global posted a net profit of RM10.56 million, or 2.6 sen per share, compared with RM5.66 million, or 1.47 sen per share. Its annual revenue came in higher at RM210.4 million versus RM204.49 million the year before.

      Print
      Text Size
      Share