AISB: Back in the black by December

SHAH ALAM: Amalgated Industrial Steel Bhd (AISB) is optimistic that it can return to the black this financial year ending Dec 31, 2015 (FY15) with its proposed diversification into the property development business.
AISB saw a net loss of RM1.35 million in FY14 and has been in the red since FY09 due to high raw material prices, such as hot rolled coils, as well as increasing labour and electricity costs. Its revenue has been fluctuating over the years and was mainly affected by among others, intense competition in the market and worldwide depressed steel markets.
On Jan 16, 2015, the group announced to Bursa Securities that it is proposing to undertake the property development business to improve the revenue and profit of the group and hence, improve its net assets per share. It would provide another source of revenue and income to the group and reduce its sole dependency on the existing core business of manufacture and sales of mild steel pipes and trading of construction related materials.
AISB executive director Lim Yew Boon said it plans to develop its 11.5-acre land in Jalan Pelaya, Shah Alam, into semi-detached factories and expects good responses from the project. The proposed development project consists of 34 units with an estimated total gross development value of RM161 million.
He said there is a likelihood that the group will see revenue of RM80 million a year and contribution from this project may potentially hit 25% of its net profit.
"With the implementation of the property development scheme, more or less we can see the numbers already. We're going to launch in June this year so towards the second half of the year, we should see some numbers," Lim told a press conference after the group's EGM here yesterday, where shareholders approved its proposed diversification exercise.
AISB had previously consolidated its internal resources from its manufacturing locations at Jalan Utas and Jalan Pelaya into one centralised location in Jalan Utas. The Jalan Pelaya property is now vacant and the group wants to develop the Jalan Pelaya property for better earnings.
He added that AISB is looking to acquire more land and is exploring property development opportunities via acquisition or a joint venture that are mainly focused in the Klang Valley.
"While industrial development may be one of our focuses, other areas like mixed development are equally good.
"We're careful in selecting land for development. Moving forward, after successfully completed one project or halfway (through the project), we'll like to have the (property development) continuation. So the location is important to us," said Lim.
He added that despite property players in the market predicting that there will be a slowdown in property development, this can be avoided with careful selection of location and land.
AISB is engaged in the manufacture and sale of steel-related products and while it is taking active measures to venture into new growth area to diversify its income stream, the steel division will remain as its core business.
However, CFO Jack Soo Eng Choon qualified that the business segment is likely to remain challenging environment in the back drop of compressed margins and the implementation of the Goods and Services Tax in April.