Melati Ehsan looks to property development for revenue boost

KUALA LUMPUR: Melati Ehsan Holdings Bhd is looking to reduce reliance on construction jobs by ramping up activities in property development, said its managing director Tan Sri Yap Suan Chee.

Based on its audited accounts for financial year ended Aug 31, 2016 (FY16), construction jobs contributed 70-80% to its total revenue.
“I think revenue from construction will reduce to maybe 50-60% and the rest maybe from property, by FY18,” he told reporters at its AGM yesterday.

Yuan said a shift towards property development will also help to improve its net profit by FY18, as it will be able to reduce reliance on construction where profit margins are small.

“If you look at construction profit, it’s not that good because there are so many contractors. Everybody is chasing for the same jobs. In a way we are quite lucky, as we can get government jobs … we normally do government or GLC (government-linked company) jobs,” he said, adding that most of the big construction jobs are undertaken by the bigger contractors.

The group’s net profit for the first quarter ended Nov 30, 2016 fell 52.76% to RM504,000 from RM1.07 million in the preceding year but Yap is confident that things will improve by FY18, driven by its mixed development in Bandar Selayang.

“If my Selayang project is launched, it will contribute quite substantially to our group profit. The project is more or less there already. My plan is to start in the third quarter this year; we can probably get the approvals by the second quarter,” Yap said.

Recall that the company acquired over nine acres of leasehold land in Bandar Selayang for RM77.74 million cash last year from Aturan Utama Sdn Bhd. The proposed project is pending approvals from the Economic Planning Unit and the Sepang Municipal Council.

On land acquisition, Yap said it is on the lookout for more land in the Klang Valley, especially in locations close to public transport or transit-oriented developments. As of Nov 30, 2016, the group’s cash and cash equivalents stood at RM8.59 million.

For construction, the group’s order book as at end-2016 stood at RM5.3 billion, including a RM99 million road works contract in the East Coast Economic Region (ECER) awarded by the Public Works Department in August last year.

Yap is optimistic of obtaining another contract under the Central Spine Road project in ECER, due to its past performance and reasonable pricing.

The group is also in talks with Selangor State Development Corp to be the turnkey contractor for a township development, which will offer affordable housing.

The group’s other ongoing projects include Tenaga Nasional Bhd’s workers quarters in Kelana Jaya, Selangor, 500 units of Public Housing Programme homes in Sentul, Kuala Lumpur, and a 1Malaysia Civil Servants Housing project named Residensi Bayu Andaman, also in Sentul.

On Bursa Malaysia yesterday, Melati Ehsan closed unchanged at 87 sen yesterday with a total of 124,400 shares traded.