Gunung Capital sees 75% earnings drop this

PUTRAJAYA: Gunung Capital Bhd's earnings for the financial year ending Dec 31, 2015 (FY15) could see a sharp fall of 75% due to the suspension of the National Services (NS) programme this year.
"What we expect is substantial decrease in profit, but not losses," executive director Iskandar Ibrahim told SunBiz after the company's EGM here last Friday.
For FY14, Gunung Capital's net profit was flat at RM14 million compared with RM14.06 million in FY13. For the first quarter ended March 31, 2015, its net profit slumped 75.48% to RM1.07 million against RM4.36 million in the previous corresponding period.
It was awarded a three-year contract worth RM164.95 millon last year to provide transportation for 82 national service camps over a nine-month period for every calendar year. The contract is supposed to run from Dec 26, 2014 to Dec 25, 2017.
However, as part of the government's effort to slash its operating expenditure by RM5.5 billion, the NS programme has been suspended this year, hence resulting in Gunung Capital losing substantial earnings from the contract.
Iskandar said following that, the company is now requesting the government to extend the contract by another year to 2018.
The government has indicated that the NS programme will resume in 2016.
"The letter has been sent to the Ministry of Finance, we hope to get a reply by the third quarter," he added.
Despite the anticipated drop in earnings, he stressed that the company still has a strong balance sheet, with RM40 million cash in hand and no borrowings.
Iskandar said in the meantime, the company has secured contracts to provide bus services to other government agencies and universities.
Besides being involved in the transportation business, Gunung Capital is aggressively expanding its renewable energy division, which will eventually become a major earnings contributor to the group over the longer term.
He said currently there are three hydropower plants under construction, with the very first plant to start operations in the middle of next year. It takes two years to build a hydropower plant.
He therefore noted that the renewable business, which incurs a quarterly net operating loss of RM300,000 due to start-up costs, will start contributing to the group's bottomline next year.
Gunung Capital has to-date secured feed-in-tariff approvals for eight hydropower plants, with total estimated installed capacity of 140MW.
It has also inked renewable energy power purchase agreements with Tenaga Nasional Bhd, where it could sell the power generated to the national utility giant at a premium over a 21-year period.
To fund its expansion plans, Gunung Capital aims to raise some RM200 million through a sukuk issuance within the year.
Iskandar also pointed out that the bonus issue exercise, which was approved by shareholders last Friday, would help boost the liquidity of the company's shares and attract more institutional funds. The bonus issue of up to 111.23 million shares is on the basis of two bonus shares for every three existing shares.
The counter closed 2 sen higher to 83 sen last Friday on some 159,500 shares done.