Consortium Zenith not resting on its laurels

KUALA LUMPUR: Consortium Zenith BUCG Sdn Bhd (CZBUCG), which is currently undertaking a RM6.3 billion project to build three expressways and an undersea tunnel linking Penang island to the mainland, is not resting on its laurels after winning its first project in the country and has got its sights set on clinching several more mega projects here.

CZBUCG executive vice-chairman Datuk Lee Chee Hoe said it expects the announcement of “exciting developments” to be made in the first or second quarter of next year.

“We are looking forward to work with the state governments, as well as the federal government for infrastructure projects, [of which their] value can be bigger than our current Penang undersea tunnel project,” he told The Edge Financial Daily in an interview.

He said CZBUCG had been working towards securing new projects in Malaysia, and the announcement of the new projects is likely to be in the first or second quarter of 2016.

However, Lee declined to identify the potential projects and their exact value until things have been firmed up.

CZBUCG is a joint venture among Zenith Construction Sdn Bhd(99.94%), Beijing Urban Construction Group Co Ltd (0.02%), Sri Tinggi Sdn Bhd (0.02%) and Juteras Sdn Bhd (0.02%), with China Railway Construction Co Ltd (CRCC) as its engineering, procurement and construction contractor.

Lee said the consortium had turned profitable since the last financial year ended Aug 31, 2014 (FY14), from a net loss of RM7.97 million with zero revenue in FY13, the first year it was incorporated.

A check with the Companies Commission of Malaysia showed that CZBUCG posted a net profit of RM1.15 million on a revenue of RM85.07 million in FY14.

For FY15, Lee said CZBUCG is expected to register a higher net profit of about RM20 million on a revenue of some RM160 million on contributions from the sale of a 3.67-acre (1.48ha) land in Bandar Tanjung Pinang, Penang to Ewein Zenith Sdn Bhd for RM133 million. CZBUCG owns 40% in Ewein Zenith while the remainder is held by Ewein Land Sdn Bhd, which in turn is a wholly-owned subsidiary of Ewein Bhd.

“Next year (FY16) will be a better year for CZBUCG as construction work on the three highways [in Penang] begins,” he said.

While CZBUCG is ready for an initial public offering (IPO), Lee said its board of directors wants to retain control of the consortium for now.

“We are ready to list. We have previously held a few meetings with the Singapore Exchange [Ltd], but the board prefers to maintain control of the company. We also need to seek approval from our Chinese shareholders that are GLCs (government-linked companies) [before going public],” he said.

“Today, we have zero gearing. While construction of the first phase of the Penang undersea tunnel project is estimated at RM800 million, we can finance it partially through proceeds from the land sale [to Ewein Zenith].

“But we do have plans to go for an IPO [in the future], especially when we seek to raise our gearing to fund the two new projects,” he added.

In October 2013, CZBUCG was awarded the contract to build the RM6.3 billion integrated road transport project comprising a 12km paired road between Tanjung Bungah and Teluk Bahang, a bypass each between Air Itam and the Tun Dr Lim Chong Eu Expressway, and between Gurney Drive and the Tun Dr Lim Chong Eu Expressway, as well as a 6.5km undersea tunnel in an agreement signed with the Penang state government.

To pay for the works, the Penang government allotted 44.5ha of freehold land in Tanjung Pinang at about RM1,300 per sq ft to CZBUCG.

Asked whether the Penang undersea tunnel project will incur cost overruns, Lee said the Penang government had capped the cost at RM6.3 billion.

Going forward, Lee said CZBUCG plans to expand its operations overseas by leveraging on CRCC as the latter utilises more advanced building technology and equipment that could facilitate the consortium to bag sophisticated and high-value jobs.