Ni Hsin marches on with loss-making co venture

KUALA LUMPUR: Ni Hsin Resources Bhd will proceed with its investment in loss making Helios Photovoltaic Sdn Bhd, confident that it will become a major revenue and profit contributor to the group in the future.
Yesterday, Ni Hsin signed a head of agreement (HoA) for the acquisition of Helios at a purchase sum to be determined later, following a memorandum of understanding that was signed last December.
This would pave the way for Ni Hsin, a cookware manufacturer, to diversify into the solar energy industry.
A check with the Companies Commission of Malaysia however, shows that Helios losses widened for the financial year ended Mar 31, 2014 to RM1.93 million against losses of RM96,575 for the financial year ended December 31, 2012.
Helios managing director Ken Ong Thuan Ming told SunBiz, the losses were mainly due to start-up investment costs for its solar energy projects.
"We will return to the black for the financial year ended March 31, 2015," he said.
Helios' revenue for the financial year ended Mar 31, 2014 quantum leaped to RM1.29 million from just RM1,037 the year before.
Helio was established in 2010, specializing in the development, construction and operation of photovoltaic systems. It is currently owned by Lim Poh Sim and politician Datuk Omar Faudzar, with a 50% stake each.
The reverse take over (RTO) deal, which entails the issuance of new Ni Hsin shares at an issue price of 38 sen per share, will see Helios emerging as the controlling stakeholder of Ni Hsin.
Speaking at a media conference after the signing ceremony here yesterday, Ni Hsin managing director Chen Shien Yee said Helios' percentage of stake in Ni Hsin is still subject to due diligence and valuations.
He said the corporate exercise would allow Ni Hsin to create shareholders' value given the group's earnings growth has not been encouraging for the past three years, registering only 5-10% growth for the cookware business.
"The only way is to venture into a different business with lucrative returns and Helios is one of them," he added.
According to Ong, Helios is tendering for some US$800 million (RM2.89 billion) worth of projects in the Asia Pacific region over the next five years, of which 25-30% is from the Malaysian market. These projects include utilities, solar farms and rural hybrids.
He also said as awareness for global warming and climate change is expanding, it will boost market demand for renewable energy products.
On that note, Chen believes Helios will be Ni Hsin's major revenue and profit contributor, compared with the latter's existing revenue of RM50 million per annum.
Helios was non-committal on whether it will retain the cookware business after assuming the listing status of Ni Hsin, even as Ni Hsin has expressed interest in continuing to grow the segment.
The RTO is expected to be completed within the next six to nine months.
Meanwhile, on the aborted oil and gas venture, Ni Hsin chairman Md Nazir Kassim said the group is getting itself "ready" as the outlook for the oil and gas industry is slowly improving.
"It can be anytime, it's based on opportunity, it's good time to get into the market," he noted.
In January, Ni Hsin said it had put its plan to venture into oil and gas on hold following the steep drop in oil prices.
For the financial year ended December 31, 2014, Ni Hsin's net profit slumped 97.5% from RM2.28 million to RM57,000, due to revenue drop in most of its operating markets.
Ni Hsin's share price was suspended from 11.32 am yesterday pending the HoA signing and resumed trading in the afternoon session. It closed 2.5 sen or 6.76% lower at 34.5 sen, with some 12.27 million shares traded.