Mainstream
JAKS aspires to be infrastructure player
Lim Cian Yai 
THINGS are looking up for construction and infrastructure outfit JAKS Resources Bhd after a disappointing FY16.

The company’s share price appreciated by about 43% year-to-date (ytd) and it has set its sights on becoming a major infrastructure player.

CEO Ang Lam Poah tells FocusM he wants the public to see the company become a big infrastructure player like the YTL Group.

Ang hopes the transformation will raise the company’s valuation

He also hopes the transformation will raise the company’s valuation. Generally, the market value of a company fluctuates but is based on factors such as the sector it operates in, financial performance, debt level and broad market sentiment.

JAKS has diversified its income stream from pipe and steel product manufacturing to construction, property and power generation.

Previously known as Wing Teik Holdings Bhd, the company was taken over by Lam Poah’s father Datuk Ang Ken Seng in 2004.

The senior Ang worked as a plumber servicing homes in his early days, before passing the baton to his two sons Lam Poah and Lam Aik, who, as JAKS’ executive director, oversees its day-to-day operations.

Jewel in the crown
The company’s jewel in the crown is its 2x600MW coal-fired thermal power plant project in Vietnam, which it secured six years ago.

Since then, various agreements pertaining to power purchase, coal supply and land lease were executed, but little progress was made due to the whopping US$1.9 bil (RM8.15 bil) required to build the plant.

“We spent 10 years of effort there (Vietnam). Along the way, we overcame the hurdle of securing financing to kick-start the work.

“If this takes off, it will be a game-changer for us. We will be seen as an infrastructure player with a presence in construction and power generation,” Ang says.

Things turned around for JAKS after it established a joint venture (JV) with China Power Engineering Consulting Group Co Ltd in 2015 to develop the power plant.

JAKS owns 30% in the JV with an option to scale it up to 40%.

During the plant’s construction, JAKS will receive US$454.4 mil (RM1.95 bil) for the engineering, procurement and construction work.

About RM150 mil in revenue has been booked in JAKS’ accounts – the first time in years. The earnings will be channelled back into the JV to fund its equity stake.

When the plant commences operation, JAKS will enjoy recurring income from the JV by selling electricity to the Vietnamese government under a 25-year build-operate-transfer contract.

Investors are hoping JAKS’ financial performance will improve from now. In fact, its share price of RM1.44 is already 87.8 times its historical 12-month earnings.

But it compares unfavourably with utility companies such as YTL Power International Bhd and Tenaga Nasional Bhd, which are valued at about 13 and 10.95 times, respectively.

For Q1 ended March 31, JAKS posted a higher net profit of RM7.54 mil compared with RM1.07 mil a year ago, on the back of higher revenue of RM154.78 mil against RM122.81 mil.

The higher profit was contributed by its construction division, especially its Vietnamese project.

During the quarter, the contract contributed RM62.3 mil and RM14.9 mil in revenue and net profit, respectively.

JAKS’ overall performance will probably continue to be bogged down by its property division.

The segment incurred a net loss of RM36.7 mil in FY16, following the property market slowdown and higher operating expenses after the opening its EVOLVE Mall at Ara Damansara, Selangor.

“We hope the losses will not be higher, given the current situation. But it may persist.

“It takes a few years for a mall to turn around,” says JAKS corporate strategy senior general manager Steven Ang Si Eeng.

It is looking to sell EVOLVE Mall, but under prevailing economic conditions, it may have to wait to monetise the asset.

Board representation
JAKS has seen a good run in its share price ytd, which has since retreated to RM1.44 on July 6 from its 52-week high of RM1.79 in April.

Savvy 84-year-old investor Koon Yew Yin saw potential in the company and in February, he emerged as the single largest shareholder together with his wife, with 5.45% stake.

Since then, Koon continued to accumulate JAKS shares in the open market, becoming the single largest shareholder with 28.79% stake.

He proceeded to request board representation during JAKS’ AGM last month.

Koon has stressed that his sole reason for buying into JAKS is because of the jewel in the company – the contract to construct a 2X600 MW coal-fired power plant and sell electricity to the Vietnamese government.

A former civil engineer, he is a founding member of Mudajaya Construction Sdn Bhd which later merged with Jurutama Sdn Bhd and Ipoh Garden Bhd to form IJM Corp Bhd.

Ang, who has an 8.77% stake in JAKS, says he welcomes Koon as a substantial shareholder.

“Koon’s entry is good for shareholders. JAKS’ share price used to be very low, now we see more volume. It will be good if he is purely an investor so that we can concentrate on managing the company and add value for shareholders.

“More time is needed to consider his proposal for board representation. I have talked to him and said we have to go through the standard operating procedures,” he says.

Whatever decision is made, Koon says he has no intention of calling an extraordinary general meeting to press the issue as he needs the consent of the Ang family.

“I do not want to create problems or be seen as antagonising them [the Angs]. They are managing the company reasonably well,” he says.

This article first appeared in Focus Malaysia Issue 240.