Financials

Quarterly Report For The Financial Period Ended 30 September 2018

Financials Archive

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Unaudited Condensed Consolidated Income Statement For The Quarter Ended 30 September 2018

Income Statement

Unaudited Condensed Consolidated Statement of Financial Position As At 30 September 2018

Balance Sheet

Performance Review

Current quarter against previous year corresponding quarter

Group revenue increased significantly to RM153.6 million compared with RM85.6 million for the corresponding quarter 2017, representing an increase in revenue by 79% or RM68.0 million. This was largely attributable to revenue from the new subsidiaries, CPI (Penang) Sdn Bhd ("CPI") of RM40.5 million and King Koil Manufacturing West, LLC ("KKMW") of RM12.7 million as well as higher revenue from KPS-HCM Sdn Bhd ("KPS-HCM") of RM11.1 million.

For the current quarter ended 30 September 2018, the Group registered a loss before tax and zakat of RM265.9 million as compared to a profit before tax and zakat of RM14.7 million for the corresponding quarter 2017. Loss in current quarter mainly from share of loss from associates, specifically on SPLASH.

Performance of the respective operating business segments for the third quarter ended 30 September 2018 as compared to the preceding year corresponding quarter is analysed as follows:

  1. Manufacturing

    This sector contributed the highest increased in revenue mainly from the new subsidiaries; CPI of RM40.5 million and KKMW of RM12.7 million. Century Bond Bhd ("CBB") contributed revenue of RM48.3 million, higher than corresponding quarter 2017 by RM3.3 million. 45% or RM21.6 million of CBB's revenue was from paper business and the remaining was from carton, plastic and consumer businesses.

    For the current quarter, this sector posted a profit before tax of RM12.9 million as compared to RM3.8 million in the corresponding quarter 2017, higher mainly due to consolidation of CPI's six months results.

  2. Trading

    Revenue of RM28.3 million was 8% or RM2.0 million higher than the corresponding quarter's revenue of RM26.3 million mainly from higher sales of water chemicals.

    In line with higher revenue, this sector posted a higher profit before tax of RM3.4 million as compared to RM2.3 million in the corresponding quarter 2017.

  3. Licensing

    This sector recorded RM8.0 million revenue to the Group during the current quarter as compared to RM8.4 million in the corresponding quarter 2017 mainly due to foreign exchange movement as the licensing amount is similar at USD2.0 million.

    For the current quarter, this sector posted a profit before tax of RM2.1 million as compared to loss before tax of RM0.5 million in the corresponding quarter 2017 mainly due to

  4. Infrastructure and utilities

    Revenue of RM16.6 million was RM14.1 million higher than the corresponding quarter's revenue of RM2.5 million mainly contributed by KPS-HCM.

    Infrastructure and utilities sector recorded a loss of RM268.5 million as compared to corresponding quarter 2017 with profit of RM17.6 million. SPLASH and Sistem Penyuraian Trafik KL Barat Holdings Sdn Bhd ("SPRINT") posted share of loss of RM268.7 million and RM0.2 million respectively as compared to share of profit of RM18.1 million and share of loss of RM0.3 million respectively for the corresponding quarter 2017. Huge losses at SPLASH mainly due to impairment losses on intangible asset and receivables.

  5. Oil and gas

    NGC Energy Sdn Bhd ("NGC Energy") registered a profit after tax of RM7.0 million as compared to a profit after tax of RM7.3 million in the corresponding quarter of 2017. The Group's share of profit was RM2.8 million as compared to share of profit of RM2.9 million in the corresponding quarter 2017.

  6. Telecommunication

    The Group's share of loss from Ceres Telecom Sdn Bhd ("Ceres") for the current quarter was RM0.6 million, similar to the corresponding quarter 2017. The Group had on 29 October 2018 disposed of its investment in Ceres.

  7. Investment holding

    Investment holding recorded revenue of RM41.7 million, lower than the corresponding quarter 2017 by RM31.7 million mainly due to lower dividend received from subsidiaries.

    In line with the lower dividend received from subsidiaries, this sector recorded a profit before tax and zakat of RM15.1 million as compared to RM58.9 million in the corresponding quarter 2017.

  8. Property Investment

    Property investment recorded nil revenue as compared to RM1.3 million in the corresponding quarter 2017, due to no leasing income at Quality Hotel City Centre starting from April 2018. This sector recorded a loss before tax and zakat of RM0.8 million as compared to a profit before tax of RM0.8 million in the corresponding quarter 2017.

Current year to-date against previous year to-date

For the nine months ended 30 September 2018, the Group registered revenue of RM410.8 million as compared to RM238.3 million in the corresponding period 2017, representing an increase in revenue by RM172.5 million or 72%. The significant increase was mainly due to revenue from CPI which was acquired in March 2018 and KKMW which commenced operations in May 2018. The significant increase in revenue is also due to revenue from KPS-HCM in corresponding period 2017 was consolidated for three (3) months as compared to nine (9) months in current period.

The Group's loss before tax and zakat for the current period of RM208.7 million as compared to profit before tax and zakat of RM74.6 million in the corresponding period 2017, mainly due to share of loss of associates, specifically on SPLASH.

Performance of the respective operating business segments for the nine months ended 30 September 2018 as compared to the preceding year corresponding period is analysed as follows:

  1. Manufacturing

    The manufacturing sector contributed a revenue of RM248.4 million and profit before tax of RM26.6 million as compared to corresponding period 2017 revenue of RM124.1 million and profit before tax of RM10.1 million. Higher revenue and profit before tax in current period is mainly due to six months contributions from CPI and four months results from KKMW.

  2. Trading

    Trading sector posted a profit before tax of RM7.5 million on the back of total revenue of RM82.1 million. The current period revenue was higher by 8% or RM5.9 million as compared to corresponding period 2017 due to higher revenue from sale of chemicals.

  3. Licensing

    The licensing sector recorded revenue of RM23.2 million as compared to corresponding period 2017 of RM25.5 million on the back of lower licensing revenue from US licensees. Profit before tax was RM3.1 million as compared to corresponding period 2017 of RM0.3 million.

  4. Infrastructure and utilities

    This sector recorded consolidated revenue of RM67.3 million as compared to RM2.5 million in the corresponding quarter 2017 as the consolidation of KPS-HCM results only started from July 2017. Loss from the infrastructure and utilities sector for the current period is RM207.8 million as compared to the corresponding period's profit of RM79.7 million mainly due to share of losses contributed by the associated companies, specifically from SPLASH due to impairment losses on intangible asset and receivables in current period.

  5. Oil and gas

    For the current period, NGC Energy registered profit after tax of RM27.1 million which translated into the Group's share of profit of RM10.8 million as compared to share of profit of RM8.3 million for the corresponding quarter 2017 due to higher price recorded from I&C segment.

  6. Telecommunication

    The Group's share of losses for the current period in Ceres was RM1.3 million, lower by RM0.4 million as compared to share of losses of RM1.7 million for the corresponding period 2017, mainly due to lower expenses incurred. The Group had on 29 October 2018 disposed of its investment in Ceres.

  7. Investment holding

    Investment holding sector recorded lower revenue of RM46.1 million as compared to RM91.7 million in the corresponding period 2017. This sector recorded a loss before tax of RM13.0 million as compared to a profit before tax of RM54.6 million in the corresponding period 2017 mainly due to finance cost incurred in financing CPI acquisition.

  8. Property Investment

    Property investment sector recorded lower revenue of RM0.6 million as compared to RM3.4 million in the corresponding period 2017, due to no leasing income at Quality Hotel City Centre starting from April 2018. This sector recorded a loss before tax of RM2.1 million as compared to a profit before tax of RM1.6 million in the corresponding period 2017.

Commentary On Prospects

  1. Manufacturing

    CBB's primary focus would be on growing its paper bags business. To propel growth in the Malaysian market, CBB plans to strengthen its position in the non-cement sector which has recently generated strong demand and better margins.

    Regionally, CBB plans to tap into the opportunity of the increasing infrastructure spending and capital projects in South East Asia, which presents growth opportunities for CBB.

    The King Koil group of companies ("King Koil Group") had its first manufacturing plant in the US commence its operations in May 2018. The plant is delivering King Koil mattresses to a growing network of customers comprising furniture and bedding specialty retailers in California, Arizona and other surrounding states. The products are also exported to customers in markets with viable demand for Made-in-USA products. Continuous efforts are being invested into optimising the plant operations, growing the distribution network and developing products to drive revenue growth under the manufacturing segment.

    CPI (Penang) Sdn Bhd ("CPI") continues to focus on its high precision plastic injection moulding segment which currently contributes the majority of its revenue to-date, while gradually exploring the tremendous potential that the box-build segment possesses. With the recent land acquisition made in Bayan Lepas, Penang, CPI is committed in bolstering its presence into becoming one of the prominent players in the industry whilst maintaining its competitive edge by providing end-to-end solutions to the market.

  2. Trading

    Aqua Flo had secured Air Selangor tender for the supply and delivery of water treatment chemicals to water treatment plants for a duration of two years effective 1 November 2018 to 31 October 2020 with an optional extension for another year. The estimated contract sum is RM162.5 million.

    Aqua Flo also continuously bid for other contracts for the supply and delivery of water treatment chemicals and monitoring equipment. Concurrently, Aqua Flo is embarking on strategic initiatives to improve future profitability by strengthening operational efficiency and venturing into other water related businesses.

  3. Licensing
  4. While the King Koil Group changes direction for its licensing business in the US market, it remains focused on growing the International licensing segment. Growth from this segment will be driven by i) continuous engagement with the licensees and supporting their market expansion efforts; and ii) adding more territories to the King Koil network, which already covers over 80 countries worldwide. Strengthening the brand power in the US is expected to have positive impact on the International licensing segment by increasing the brand value in other markets, and attracting manufacturers of high calibre and capabilities to join the King Koil group of licensees.

  5. Infrastructure and utilities

    The outlook for the water services sector is expected to be positive with opportunities arising from the State Government's consolidation exercise to provide a holistic water services in Selangor, Kuala Lumpur and Putrajaya. In the light of this opportunity, the Group through its wholly-owned subsidiary Nadi Biru Sdn Bhd, has ventured into the water pipe rehabilitation business through its subsidiary, Smartpipe Technology Sdn Bhd ("SPT"). SPT had obtained the product certification and C1 license from Suruhanjaya Perkhidmatan Air Negara and is registered as a G7 contractor with the Construction Industry Development Board which enables SPT to undertake water and sewerage projects for both conventional and Compact Pipe ® technology.

    SPT is constantly engaging various parties and state water agencies to promote the Compact Pipe ® technology, where it has proven to be a success in several countries including Hong Kong. This success has recently been replicated locally – in July 2018, SPT had successfully completed the installation of Compact Pipe ® as part of a pilot rehabilitation project in Cheras, Kuala Lumpur as per its agreement with Pengurusan Air Selangor Sdn Bhd. Further to that, SPT had also successfully completed a similar pilot pipe rehabilitation project with Perbadanan Bekalan Air Pulau Pinang, at Bagan Luar, Penang. With the completion of these pilot projects, being the first of its kind in Malaysia, SPT has demonstrated its readiness in employing this cutting-edge technology in the Malaysian market.

    On the infrastructure and utilities, KPS-HCM Sdn Bhd ("KPS-HCM") is progressively completing the infrastructure work at Pulau Indah Infrastructure Park, Phase 3C. KPS-HCM will continue to actively identify and participate in tender bid for other similar projects to further strengthen the current book order and enhance the performance of the Group's infrastructure and utility segment.

    With the imminent takeover of the Group's 30% equity interest in Syarikat Pengeluar Air Selangor Sdn Bhd held through Viable Chip (M) Sdn Bhd, a wholly owned subsidiary of the Company, the Group is continuously assessing business opportunities in sectors where it already has existing investments as well as new business sectors or areas to grow the Group further.

  6. Oil and gas

    The Group remains confident in the long-term prospects of the oil and gas sector as the Group expects an increase in demand for liquefied petroleum gas in the industrial and commercial sector while demand from domestic sectors shall remain strong over the next few years.

  7. Telecommunication
  8. In line with the Group's strategy of enhancing value in its core businesses to generate sustainable returns for all of its stakeholders, the Group's wholly owned subsidiary, Perangsang Telco Sdn Bhd ("PTSB"), had on 29 October 2018 disposed of its entire 34.35% interest in Ceres to a non-related company.