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CGB gears up for more construction projects

CGB gears up for more construction projects
CGB will also be executing the building service work for 282 units of Montage condominium in Penang with a contract value of RM29.3 million.

KUALA LUMPUR: Central Global Bhd (CGB) aims to make significant headway into the infrastructure construction sub-sector and the East Malaysia construction industry by undertaking currently secured projects and bidding for new projects from 2023 onward.

Banking on a team of experts that came along with the company's acquisition of RYRT International Sdn Bhd (RISB) in June this year, CGB is gearing up to tap more construction projects with the government's support through various initiatives, such as public infrastructure projects.

Group managing director Chew Hian Tat said that besides enhancing efficiency and productivity and optimising cash flow, CGB would continue to focus on completing the ongoing projects.

These are the Montage project and Lahad Datu Fasa 1 Menaiktaraf Sistem Bekalan Air project and finalising of the final accounts for the completed Beacon Executive Suite and Eco Horizon.

"In addition, we are also serving our defect liability period for the completed Beacon Executive Suites and Eco Horizon projects, which will end by the second quarter (Q2) of 2023," he told The New Straits Times.

Chew said CGB would also start to execute the newly secured contracts for Quinton 378 units of a condominium in Penang with a contract value of RM52.6 million, the building service work for 80 units of Sri Bayu apartment in Penang with a contract value of RM3.1 million.

Further, CGB will also be executing the building service work for 282 units of Montage condominium in Penang with a contract value of RM29.3 million.

In addition, the company will also undertake the supply of labour, materials, machinery, tools and equipment for the construction of quarters for students and staff for Institute Latihan Perindustrian (ILP) in Labuan, Sabah, that has a contract value of RM26.0 million.

CBG's 70.0 per cent owned subsidiary, RISB, has also secured the construction and completion of Projek Jalan Semawang to Tanjung Kuala Gum-Gum, Sandakan, Sabah, with a contract value of RM183.2 million.

To date, CGB has been supported by more than a handful of local construction contracts with a combined outstanding value of RM410.1 million.

Malacca Securities Sdn Bhd, in a report, said this represents a healthy orderbook-to-cover ratio of 8.7x against FY21 construction revenue of RM46.9 million and will provide strong earnings visibility over the next three years.

"Meanwhile, we gather that their tender book is relatively healthy at RM500-RM600 million, mainly for infrastructure-related projects in East Malaysia.

"We have imputed an orderbook replenishment assumption of RM150.0 million for FY23," the research firm noted in the report.

Despite the positive momentum, Chew said CGB anticipates a challenging future for its manufacturing and construction businesses due to intense competition in the export market and rising raw material costs, which will likely erode profit margins.

He said that despite these challenges for its manufacturing business segment, the company remains resilient and steadfast in meeting these challenges.

"Our plant efficiency in terms of cost and quality will be our focus to maintain and improve our competitiveness.

"With the new masking tape coater production line expected to be ready by end-2022, there will be a significant cost efficiency with the greater volume of productions and lower wastage with the new technology of the coater machine.

"CGB's manufacturing segment has a production capacity of 20.0 million sqm of tapes per annum and is currently operating at a 90.0 per cent utilisation rate.

Some notable products include high-temperature masking tapes, automotive masking tapes, general-purpose masking tapes, painter's tapes, double-sided adhesive and adhesive tapes, and speciality tapes for the general application category.

As a market leader specialising in industrial tapes and label stocks, CGB commands approximately 60.0 per cent market share of the masking tape business in Malaysia, based on FY21 revenue of RM60.1 million from the manufacturing segment.

CGB subsidiary, Central Industrial Corporation Bhd (CICB), has been serving the automotive, painting and industrial business sectors in both the domestic and international markets, such as Australia, New Zealand, USA, China, Thailand, India, Singapore, Indonesia, Vietnam, Brunei,

Hong Kong, Japan, South Korea, Taiwan, Sri Lanka and Europe.

"Our manufacturing segment has had a stable performance in the past years, and we believe that with more opportunities to be seized, we aim to double or even triple our revenue per annum for the segment in FY23.

"We are looking at 2.5 times to 70 million sq m of tapes per annum from the current 20 million sq m, which CGB will achieve by improving production efficiency and investing in new machines," Chew said.

When asked about plans to increase the tape production output, Chew said CGB's additional mixers have been installed and commissioned since August 2022.

He said the additional mixers would increase output by 20 per cent to 215 metric tonnes.

"We also look forward to complementing our existing range of industrial tapes by increasing the product portfolio through our consistent research and development efforts," Chew said.

CGB, already operating at maximum capacity, will expand current operations by relocating operations from Perai to Sungai Petani, Kedah.

Adding new machinery would bump CGB's production capacity to 70.0 million sqm of tapes from 20.0 million sqm per annum.

According to the report, the move is to cater for the rising demand from existing customers. It will also allow CGB to expand product offerings to a new customer base in South East Asia.

Since July 2022, the installation of additional mixers will improve the mixing output by 20.1 per cent to 215 metric tonnes per month (MT/m) from 179 MT/m.

Besides the two existing businesses, CGB will also be eyeing further diversification into the renewable energy segment, specifically solar energy.

Malacca Securities noted that CGB, with its foothold in the construction segment, will be eyeing the construction of solar PV projects.

In end-April 2022, GCB, via its wholly-owned subsidiary, Central Global Energy Sdn Bhd has inked a memorandum of understanding (MoU) with JJ-LAPP (M) Sdn Bhd, a leading cable and connectivity solutions provider, to jointly bid for projects relating to the construction and commissioning of solar power and renewable solar hybrid systems.

The abovementioned MoU will be effective for a year.

Malacca Securities expects CGB to see sequential improvement for FY23, backed by the delivery of an outstanding construction orderbook and ongoing manufacturing plant expansion plans.

Revenue is expected to improve 38.4 per cent year-on-year (YoY) to RM275.1 million, while net profit is expected to come in at RM17.9 million, an improvement of 67.8 per cent YoY.



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