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EITA seeks lift from infra projects
Lim Cian Yai 
EITA won jobs worth RM94.3 mil from MRT Corp to supply lift systems for all MRT1 underground stations
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Homegrown elevator and escalator player EITA Resources Bhd can expect further bounty from the country’s rollout of infrastructure, especially urban rail, projects.

The company supplied lifts and escalators to the MRT Sungai Buloh-Kajang (MRT1) project last year, and is seen as a frontrunner to grab contracts for the upcoming MRT Sungai Buloh-Serdang-Putrajaya Line (MRT2) and Light Rail Transit 3 (LRT3) projects.

EITA got a major boost recently when it announced it received a letter of acceptance (LOA) for a RM69.83 mil contract to supply lift and escalator systems for MRT2 stations under package L&E 202 (Group A). And there could be more contracts to come.

A total of 30 units of lifts and 77 units of escalators will be supplied and installed by EITA for nine elevated stations, namely, Kentomen, Jalan Ipoh, Kuchai Lama, Taman Naga Emas, Sungai Besi, Serdang Raya North, Serdang Raya South, Seri Kembangan and UPM.

Fu says the bid size for MRT2 is larger than MRT1

In an interview with FocusM, group managing director Fu Wing Hoong says the size of projects it bid for MRT2 is larger than MRT1. This means that should EITA win the jobs it bid for, it could be more than the combined value of the two packages it won for MRT1.

“Works for MRT2 and LRT3 cannot be a direct comparison with MRT1 due to the different specifications. I can only say the bid size (for MRT2) is larger, which could be due to multiple factors like inflation, quantity, etc.

“We have put in our bid (for both MRT2 and LRT3) and we hope for the best,” says Fu.

News of the latest contract win sent EITA’s share price to a five-month high, climbing 5.6% to close at RM1.88 on Oct 17.

To recap, EITA won jobs worth RM94.3 mil from Mass Rapid Transit Corp Sdn Bhd (MRT Corp) in the second half of 2014 to supply lift systems for all MRT1 underground stations. In total, it installed 99 escalators, 31 elevators and two travellators at all seven underground stations along the line. The remaining stations are elevated.

Tenders for MRT2 Phase 1 and 2 elevator jobs closed in May and August respectively.

Operation of the 52km MRT2 is slated to start in phases from the second quarter of 2021 with full commissioning a year later.

Fu declined to comment on the size of its LRT3 bid, stressing he is not in a position to comment as EITA has no prior experience in delivering works for LRT projects. LRT3 is set to be completed by 2020.

 

Positive reviews

Analysts are positive on EITA’s chance of grabbing slices of the cake from the two rail infrastructure projects.

CIMB Research, in a result note dated Aug 22, believed EITA has a strong chance of winning at least one each of the MRT2 and LRT3 elevator job packages.

“The successful completion of the MRT elevator project this year by EITA has boosted its track record, putting it in a strong position to secure more elevator and lift infrastructure jobs in the near future,” analyst Nigel Foo wrote.

LRT3 will have 26 stations with one underground, while MRT2 will have 37 stations – 26 elevated and 11 underground.

Construction industry players have received some good news of late with Prasarana Malaysia Bhd dishing out four major jobs for the LRT3 project worth RM5.31 bil to Sunway Construction Group Bhd, Gabungan AQRS Bhd, WCT Holdings Bhd and Mudajaya Group Bhd. Delivery of these packages will be over the next 36 months.

Prasarana will be the asset owner and operator of LRT3. It already owns and operates two existing LRT networks, KL Monorail, Sunway-BRT and bus services in various states. With four big LRT3 jobs already awarded, Prasarana will have six more major civil work packages to award for LRT3.

Foreign brands like thyssenkrupp Elevator, Dover Elevator and KONE are also competing with EITA in local market where it has a 10% market share.

According to Fu, the size of EITA’s outstanding order book stood at RM146.13 mil as of June 30, consisting primarily of elevator orders. Jobs are a mix from both public and private sectors.

Nevertheless, he stresses the size of order book does not reflect EITA’s overall performance, as it also receives short-term orders that are often not reflected in the order book due to the fast turnaround time.

Its turnover of RM288.03 mil in the financial year ended Sept 30, 2016 was the highest in its history. This was boosted by works from MRT1, which has been in operation since last December, servicing an average of 100,000 commuters daily.

 

Revenue dip

Fu reckons the MRT1’s effect has phased out in FY17, thus the decline in revenue for the first nine months versus the previous corresponding period.

Moving on, EITA will continue to intensify efforts to boost export revenue amid cooling off of local construction activities.

Turnover for the cumulative period ended June 30 fell 7.42% year-on-year (yoy) to RM210.52 mil versus RM227.4 mil the year before.

Turnover slipped to RM60.97 mil for Q3 ended June 30 against RM85.41 mil a year ago, due to lower execution of elevator projects for the manufacturing segment.

Key products for the manufacturing division are EITA-Schneider elevator systems and Furutec busduct systems that are used to conduct electric
current. Its other businesses include distribution of electrical and electronic components as well as service maintenance of elevators.

Nevertheless, Fu says the decline in revenue for the nine months was “within expectation” given the non-recurring nature of jobs it has completed for MRT1. “This is also a challenge we need to address. While we have a segment that is cooling down, the export segment is growing.

“Since our manufacturing business covers both export and domestic markets, we hope to see better growth in the export segment, and continue to focus on markets abroad to help cushion the impact of downcycles in local construction activities,” he explains.

Expanding in Asean, Kenya

EITA Resources Bhd started exporting elevators in 2008 with the first shipment to Vietnam. Today, its footprint spans across countries in Asean to as far as Kenya in Africa.

Group managing director Fu Wing Hoong says EITA will focus particularly on Indonesia, the Philippines and, to a lesser extent, Vietnam to boost export revenue. The company has representative offices in Vietnam and Indonesia.

Fu’s confidence stems from the fact that construction will be a primary economic growth driver for developing countries. And given its key business of manufacturing elevators and busduct are closely tied to the ups and downs of building activities, he believes there should be plenty of opportunities for EITA.

“The challenges to tap markets abroad are resources, talent and the culture barrier. We have to find our way and work hard in export.”

While export contribution is still some distance from the 50% target EITA aspires to achieve over the next three years, Fu stresses it is the absolute contribution that matters rather than the percentage.

“In fact, current export performance has picked up significantly compared to two years ago when we first set the target. Though percentage remains flat at 20%, value wise we have seen substantial growth,” he adds.

About 20%, or RM56.33 mil of its RM288.03 mil FY16 revenue, was generated from the export market. This represents an 18% jump yoy versus RM47.64 mil in the previous year.



This article first appeared in Focus Malaysia Issue 255.