GFM eyes expansion through M&A, JV

KUALA LUMPUR: Integrated facilities management (IFM) company GFM Services Bhd, which assumed the listing status of AsiaEP Resources Bhd yesterday, is looking to expand via mergers and acquisitions (M&A), joint ventures (JV) and collaborations.

“We are excited about the future prospects of the industry and aim to expand into new revenue streams by entering into strategic M&As, JVs and collaborations,” its managing director Ruslan Nordin told reporters yesterday.

He said there are several M&A proposals in hand, and is confident of concluding one deal by year-end. He declined to reveal the number of proposals or which parties they are in talks with, saying only that they will focus on the local and regional markets.

Asked whether it is looking for M&A opportunities with government linked companies (GLCs), Ruslan said it is not limiting itself to only GLCs.

GFM has an orderbook of RM377 million that will last until 2034, comprising 26 projects including the Universiti Teknologi Mara Malaysia Tapah campus project. It also has a tenderbook of some 20 projects worth RM1.8 billion and a hit rate of 3-5%.

GFM offers mechanical and electrical, and civil and structure, cleaning, landscaping, pest control and other general services.
It also provides advisory and consultancy services in the areas of facility design review and facility condition audits. Currently, it has a 6.3% market share of the IFM education segment and 3.7% market share in the IFM government offices and premises segment.

GFM’s revenue grew at a compound annual growth rate of 11% from the financial year ended Dec 31, 2011 (FY11) till FY15, with 48% of its total revenue coming from the government sector, 22% from the education sector and the remaining from construction, property management, banking and oil and gas sectors.

GFM’s listing yesterday marks the completion of a reverse takeover exercise of AsiaEP Resources. The stock made its debut on the ACE Market at 46 sen, 8 sen higher than its offer price of 38 sen per share, with 3.28 million shares traded. The stock closed at a 22.37% premium over its offer price at 46.5 sen yesterday, with a total of 56.19 million shares traded.

Of the total RM42 million proceeds raised, RM4 million will be used for listing expenses and working capital while RM38 million will be paid to existing shareholders who sold 100 million of their shares.

MIDF Research ascribed a fair value of 42 sen on GFM based on 11 times price-earnings ratio (PER) of FY17 earnings per share. It said in its report yesterday that the 11 times PER is fair, compared with its peer AWC Bhd, which is also trading at 11 times while UEM Edgenta Bhd is trading at 16.5 times PER.

The research house highlighted GFM’s orderbook and diverse customer base as one of its strengths, which reduces reliance on any single particular job. It also expects the company to be able to replenish its orderbook due to increasing demand for outsourced facility management services.

MIDF Research expects GFM’s pre-tax profit to remain over 20% due to the management’s experience in executing jobs and choice of jobs. The company is also asset light with minimal overheads.