Grand-Flo Bhd sees higher contribution from IT segment this year

PETALING JAYA: Grand-Flo Bhd which has just ventured into the construction business, is eyeing stronger earnings contribution from its information technology (IT) segment this year, on the back of stronger demand driven by Industrial Revolution 4.0 (IR4.0) and strong orderbook.
In addition to its current total order book of RM34 million for the IT segment, the group is also confident of securing additional projects worth RM21 million which is expected to come from government-linked companies, fast moving consumer goods and the semiconductor sector.
Group president Derrick Tan said the segment is expected to be the major contributor to the group’s bottom line this year. Inclusive of gains from disposal, the segment contributed RM11.7 million to the group’s net profit of RM14.5 million for the financial year ended Dec 31, 2017.
Excluding extraordinary gains, Grand-Flo is still bullish on the performance of its IT segment, despite a softer outlook for its property segment.
Its property development arm has an inventory amounting to RM40 million, which it is looking to sell. It has also started structural works for Phase 2 of Vortex Business Park in Batu Kawan, Penang.
“(For IT) this year will be stronger. It will be 70% easily. What we are doing for property and construction is for the future. Maybe next year, we will have a much bigger contribution from property and construction. Once this acquisition is completed, we will own a 100% in Innoceria,” he said while adding that the long-term target is to even the contributions of both its core businesses.
At an EGM today, Grand-Flo received its shareholders’ nod for the acquisition of the remaining 49.9% stake in Innoceria Sdn Bhd, to make inroads into the construction industry.
The construction arm is expected to lock in a bid for its first project worth RM15 million by next week in Alor Star. Vying predominantly for housing projects, Grand-Flo said it is open to opportunities that comes its way as far as the segment is concerned.
With a current landbank size of four acres, the group is on the lookout for more land in the central portion of Peninsular Malaysia. It is however taking on a cautious approach on land acquisition given the current economic conditions.
The group opined that the zero-rating of the Goods and Services Tax is overall positive, while also noting that IT equipment does not have sales tax, which means customers will not be affected by the yet to be implemented Sales and Services Tax.
On another note, the group is planning to exit the Thailand market with the disposal of its 14.12% stake in Simat Labels Co Ltd after having sold off its shareholding in associate company Simat Technologies Public Company Ltd last year. The disposal is expected to be concluded by the first half next year.
“The company is actually profitable but our stake is very small so it is no point for us to hang on there. It is a profitable business, the company is making 40 million Thai baht a year,” he said.
The disposals are in line with the group’s efforts to streamline its business to two core segments – IT and property development and construction.