Fajarbaru confirms joint bid for RM7 billion Gemas-Johor Baru rail link

KUALA LUMPUR: Fajarbaru Builder Group Bhd has confirmed that it has partnered a China company to jointly bid for the RM7 billion Gemas-Johor Baru rail link.

The management is positive about the bidding result, which is expected to be finalised by the end of this month.

“We have already submitted the bid for the contract, and we are positive about the result, due to our track record and experience,” the construction firm’s managing director Teo Sock Cheng told reporters after its annual general meeting yesterday.

However, he declined to disclose the details of the Chinese partner as the joint venture has not been finalised yet.

In September, The Edge, quoting a source, reported that Fajarbaru was in talks with China Railway Construction Corp Ltd to jointly bid for the double-tracking project.

To recap, the project was revived in 2007 after being scrapped in late 2003. The MMC-Gamuda consortium was given the mandate to build the 330km stretch from Ipoh to Padang Besar for RM12.5 billion, while Indian Railway Construction was awarded the 95km stretch from Seremban to Gemas for RM3.5 billion.

In January 2011, then Transport Minister Tan Sri Kong Cho Ha said the federal government had appointed two consultants to study the Gemas-JB railway line, and was negotiating with Chinese consortiums, which would be appointed later in the year to do the job.

Now, it appeared that details are finally being finalised.

Despite the economic slowdown, Fajarbaru did not expect the double-tracking project to be delayed.

“It has been confirmed by the government. It will definitely kick off, unlikely to be further delayed,” said Fajarbaru finance director Ooi Leng Chooi.

According to Ooi, the company’s current tender book, which included the Gemas-JB rail link project, stood at RM6.2 billion. These projects include local-based infrastructure, MRT, LRT and railway.

The company’s current unbilled order book of RM304 million is expected to last another two years.

Meanwhile, the company expects to achieve double-digit net profit growth for its financial year ended June, 2016 (FY16), underpinned by its timber business.

Fajarbaru’s net profit surged 149.86% to RM2.78 million in the first quarter ended Sept 30, 2015, from RM1.11 million a year ago, while revenue rose 32.77% to RM109.4 million. The higher net profit and revenue were mainly contributed by the logging and timber trading segment.

Nevertheless, Ooi said construction remains the company’s core business.

“The major contribution now is still from the timber side, [as] timber business will continue to enhance our bottom line for the next four years,” Ooi said.

However, he added, once the company manages to secure more projects, such as the Gemas-JB rail link, contribution from construction will be higher.

Ooi conceded that the construction business is extremely competitive now, thus the need to diversify the business.

“Our business volume may come from construction, but profit may be from other activities. For construction, we try to negotiate better margin and save costs,” he said.

Ooi also said the company will continue to look for other business opportunities, which can enhance its earnings.

On the other hand, Fajarbaru only expects contribution from the property business, the earliest, in fourth quarter next year.

The company is undertaking three property projects in Malaysia with a gross development value (GDV) of RM728 million, and a maiden project in Australia with a GDV of RM231 million.

Ooi said Fajarbaru expects to launch the Puchong condominium project (GDV of RM400 million) in June next year, followed by Sentul serviced apartments (RM250 million) the following month.

“But Malacca [serviced apartments project with GDV of RM78 million] will be put on hold first depends on the market sentiment. If it (market sentiment) is not that good, we may delay one more year,” Ooi said.

The company’s total land bank stands at 220 acres (89ha) in Puchong, Sentul, Melaka, Port Dickson and Australia.

The company is looking to acquire more land, especially in the Klang Valley. “If opportunities come, we will definitely look at that, Klang Valley will be our first preference, later may be Penang,” Ooi said.

Fajarbaru rose 3.5 sen or 7% to 53.5 sen yesterday, valuing it at RM164.4 million.

This article first appeared in The Edge Financial Daily, on December 4, 2015. Tap here to subscribe for your personal copy.