Quarterly Report For The Financial Period Ended 30 September 2016

Financials Archive

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Unaudited Condensed Consolidated Income Statement For the quarter ended 30 September 2016

Income Statement

Unaudited Condensed Consolidated Statement of Financial Position As at 30 September 2016

Balance Sheet

Performance Review

a) Current quarter against previous year corresponding quarter

Continuing Operations

The Group registered revenue of RM35.49 million as compared to RM16.74 million for the corresponding quarter 2015, representing an increase in revenue by 112% or RM18.75 million. The significant increase in revenue was mainly due to higher revenue recorded by the trading sector from sales of chemicals by RM8.54 million coupled with revenue contribution from a newly acquired subsidiary in licensing sector with revenue of RM7.88 million.

For the current quarter ended 30 September 2016, the Group registered a loss before tax of RM17.96 million as compared to a loss of RM4.77 million for the preceding year corresponding quarter 2015, an increase in loss by RM13.19 million. Higher losses in the current quarter was mainly due to share of losses of associates of RM16.0 million as compared to share of profit of associates of RM1.07 million.

1. Infrastructure and utilities

For the current quarter, infrastructure and utilities sector recorded a loss of RM19.70 million as compared to the corresponding year quarter's profit of RM1.45 million, an adverse variance of RM21.15 million. Higher losses recorded in the current quarter was mainly due to higher share of losses of Syarikat Pengeluar Air Selangor Holdings Berhad ("SPLASH Holding"), a 30% associated company. The share of losses from SPLASH Holdings for the current quarter was RM19.65 million as compared to share of loss of RM0.59 million in Q3 2015 and was due to impairment loss on trade receivables and accounting impact of IC 12.

2. Trading

Trading sector revenue of RM24.16 million was 55% or RM8.54 million higher than the corresponding quarter's revenue of RM15.64 million. The significant increase in revenue was attributed to supply of chemicals to PNSB Water Sdn Bhd, a new contract which Aqua Flo Sdn Bhd secured in May 2016.

Correspondingly, on current quarter against corresponding quarter 2015 comparison, profit before tax for the current quarter was higher by RM0.46 million in line with increase in revenue. However, the profit margin has slightly deteriorated due to increase in raw material prices.

3. Licensing

Arising from the completion of 60% equity interest in Kaiserkorp Corporation Sdn Bhd ("Kaiserkorp") on 23 May 2016, the Group has consolidated the result of Kaiserkorp group. Kaiserkorp wholly-owns King Koil Licensing Company Inc ("KKLC") which owns King Koil® mattress brand licensing business and other related trademarks registered in the USA and around the world. The profit from licensing business for the current quarter was RM2.58 million on the back of revenue of RM7.88 million.

4. Oil and gas

For the current quarter, NGC Energy Sdn Bhd ("NGC Energy") registered a higher profit after tax of RM10.91 million as compared to a profit of RM1.31 million in the corresponding quarter of 2015. Despite NGC Energy's revenue has decreased by 8% as compared to preceding quarter 2015, NGC Energy recorded a higher profit than Q3 2015 by RM9.60 million due to higher government incentive under the Automatic Pricing Mechanism which came into effect in 1 June 2015 coupled with gain on disposal of a piece of land located in Penang of RM5.30 million. As a result, the Group's share of profit was higher at RM4.36 million as compared to a share of profit of RM0.52 million in the corresponding quarter 2015.

5. Telecommunication

The Group's share of loss from Ceres Telecom Sdn Bhd ("Ceres") for the current quarter was RM0.67 million as compared to a share of loss of RM0.91 million for the corresponding quarter of 2015. The lower loss of Ceres was due to higher revenue coupled with lower marketing and administrative costs as compared to corresponding quarter 2015.

6. Investment holding

Investment holding recorded revenue of RM2.34 million as compared to RM1.24 million in the corresponding quarter 2015 due to higher rental income but reduced by lower management fees. This sector recorded a loss before tax of RM6.85 million as compared to a loss of RM6.74 million in the corresponding quarter 2015.

Commentary On Prospects

1. Infrastructure and utilities

Following the completion of the Group's equity interest in TMSB in December 2015, the Group will continue to be involved in the infrastructure and utilities (via the Group's 30% equity interest in Syarikat Pengeluar Air Selangor Sdn Bhd ("SPLASH") held through Viable Chip (M) Sdn Bhd, a wholly owned subsidiary of the Company. The Selangor State Government through Kumpulan Darul Ehsan Berhad ("KDEB") had, on 26 February 2014, made offers to all the shareholders of SPLASH (including our Group) for the purchase of their respective equity interest in SPLASH with the objective of consolidating the water services industry in Selangor. However, the offers from KDEB were deemed to have lapsed on 10 March 2014 as the shareholders of SPLASH were unable to reach a final decision in accepting the indicative terms and conditions set out in KDEB's offer letter dated 26 February 2014. Given the intention of the Selangor State Government to complete the proposed restructuring of the water supply industry in the State of Selangor and Federal Territories of Kuala Lumpur and Putrajaya, a fresh offer for SPLASH may be made in the future.

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 ("Nadi Biru"), has ventured into the water pipe rehabilitation business. Nadi Biru has acquired a 51% stake in Smartpipe Technology Sdn Bhd with an investment of RM5.10 million to offer integrated solutions to facilitate maintenance of water distribution systems.

2. Trading

The Company had on 25 May 2016 entered into agreements with Prismachem Sdn Bhd and Hydrovest Sdn Bhd to enable the Company to directly hold 51% equity stake in Aqua Flo Sdn Bhd ("AFSB") which is involved in the sale of chemicals and equipment for the potable water industry. The prospects for trading sector are positive as AFSB has been recently awarded three (3) new contracts from Konsortium Air Selangor Sdn. Bhd, PNSB Water Sdn Bhd and Konsortium ABASS Sdn Bhd respectively, with a total estimated value of RM98.11 million over a period of two years.

The Group would also look into and explore possibility to strengthen the sector's revenue base and profitability by expanding its market reach to other states, capitalising on its vast experience in the water industry. The water and wastewater treatment in Malaysia is expected to grow in tandem with the Malaysian socio-economic growth. Demands are anticipated to be primarily driven by the municipal needs for providing water and sanitary services, including industry verticals e.g. food and beverages, power, automotive and palm oil. Further to support the growth, factors e.g. urbanization and population growth, manufacturing and industrialization as well as stringent regulatory governance will propel the market, of which AFSB could benefit from.

3. Licensing

The Group had on 23 May 2016 completed the acquisition of 60% equity stake in Kaiserkorp Corporation Sdn Bhd, which wholly-owns King Koil Licensing Company Inc ("KKLC"). KKLC owns King Koil® mattress brand licensing business and other related trademarks registered in the USA and around the world. The acquisition of a global franchising and licensing investment with a global franchisee turnover of over USD 1 billion will provide the Group with immense opportunities to further enhance the brand visibility globally, directly creating value to Perangsang Selangor's shareholders.

4. Oil and gas

Future outlook for the oil and gas sector will be challenging due to the weaker Ringgit Malaysia against the US Dollar. However, during the first quarter of 2016, oil prices have recovered from its low of USD29 per barrel in January 2016 to USD46 per barrel in September 2016. 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 domestic and commercial sectors over the next few years.

5. Telecommunication

For the telecommunication sector, Ceres Telecom Sdn Bhd ("Ceres"), a 34.35% associated company, is currently pursuing several initiatives to streamline its business and improve its financial performance; refocusing of its market segment, introducing new products, extending its network of distributors. Efforts are continuously being pursued in order to ensure that Ceres contributes positively to the results of the Group in the future.

6. Hospitality

For the hospitality sector, the Group is continuously assessing its investments in this sector. Perangsang Hotel & Properties Sdn Bhd ("PHP"), a wholly owned subsidiary of Cash Band (M) Sdn Bhd had on 12 May 2016 signed a leasing agreement with a third party to lease out its Quality Hotel City Centre building whereby PHP will receive rental income together with revenue sharing of 15 to 20 per cent of the gross revenue generated from the hotel operations. Arising from the leasing arrangement, the nature of business and revenue for PHP has changed from hotel operations to an income from lease.

7. Packaging and manufacturing

The Group is continuously assessing business opportunities in sectors where it already has existing investments as well as new business sectors or areas to ensure sustainability of the Group. The Group is actively engaging potential partners and is focusing to acquire assets which meet its investment criteria that include amongst others, controlling stake in mature and immediately income generating assets as well as having a dedicated dividend policy in place. The Group had on 11 August 2016 entered into conditional share sale agreement with C B Equities Sdn Bhd and other vendors to acquire 71.44% equity interest in Century Bond Berhad ("CBB") ("Proposed Acquisition"). Pursuant to Section 218(2) of the Capital Markets & Services Act, 2007 and Rule 4.01 of the Malaysian Code on Take-Overs and Mergers, 2016, PPSB was obliged to extend an MGO for all remaining CBB Shares not already owned by PPSB after the Proposed Acquisition for a cash consideration of RM1.75 per CBB Share ("Proposed MGO"). The Proposed Acquisition and Proposed MGO were approved by the shareholders of the Company at an Extraordinary General Meeting on 31 October 2016 and the Proposed Acquisition was completed on 8 November 2016. At the date of this report, PPSB holds 87.26% of CBB shares.

This new acquisition satisfies the stringent investment criteria as CBB has shown steady financial performance with healthy margins as well as cash reserves and thus has the ability to pay out dividends. In addition, its position as market leader coupled with further growth potential regionally, integrates seamlessly with the Company's investment strategy moving forward.