The promise of Ekovest Bhd’s bright future may have dimmed as the group slips into the red as its fourth quarter ended June 30, 2020, thanks to the movement control order (MCO).
In 2015, then-and-now Ekovest managing director Lim Keng Cheng told FocusM that the group was in an enviable position of being able to pay off interest expenses and loans with its strong outlook in the construction and property businesses, on top of recurring income from infrastructure.
“People keep asking why Ekovest is willing to take the risk of a loss-making business with the high level of loans shouldered by the group. But looking at the long run, this is good for the company, as it is our corporate social responsibility. Cashflow will eventually be generated with consistency in the form of recurring income,” he said in the paper’s Jan 10-16, 2015 issue.
The group first bought a 70% stake in the 18-km Duke with a 34-year concession under a RM325 mil share-swap deal with Wira Kristal Sdn Bhd in 2012.
Following that, the FocusM article pointed out that Ekovest bought the remaining 30% stake in the Duta-Ulu Kelang Expressway (DUKE) and the extension of the highway’s second phase from Malaysian Resources Corp Bhd (MRCB) for RM228 mil.
Ekovest then had full ownership of the 59-year highway toll concession, up to 2059.
‘Lim argued it was a positive move as it is good for the company in the long run’, it said.
At the time, Ekovest’s orderbook value for its construction segment stood at RM2.05 bil, while its tender book value was over RM3 bil.
After a few extra expansions were added to the highway, the group’s contribution to the country’s traffic infrastructure bumped up its order book to RM13 bil in 2017.
Taking into account all the prospects of the group from other construction projects over the years, News Straits Times reported that Ekovest’s net profit dropped 33.9% to RM29.03 mil in its second quarter ended Dec 31, 2019 (3Q19) from its previous RM43.91 mil in 3Q18.
The offset was said to be attributed to the ‘completion of certain construction works with a better profit margin’.
However, the group’s revenue for that quarter rose 6.4% to RM384.31 mil from its previous RM361.18 in 3Q19.
Now, Ekovest is looking to buy more land to strengthen its property development segment, eyeing 20 parcels of freehold land in Johor Bahru for a total of RM1.05 bil from Iskandar Waterfront Holdings Sdn Bhd (IWH).
Additionally, Ekovest expects the sales of completed properties to contribute positively to the company’s revenue and earnings for the next financial year.
It might have a long more way to go after suffering a loss in its fourth quarter ended June 30, 2020 (4Q20).
The group’s net profit for the quarter stood at -RM53.8 mil against RM23.2 mil in 4Q19, with its revenue at RM192.2 mil in 4Q20, a slight decrease from 4Q19’s RM338.4 mil.
According to The Edge Markets in a news article on Aug 27, 2020, the loss was attributed to the MCO and the slowdown in construction work.
The group’s construction operations segment’s revenue had a 35.47% decline to RM168.2 mil from its previous RM260.6 mil in 4Q19.
Its property segment fell 89.44% to RM2.94 mil from RM27.8 mil last year as the Covid-19 pandemic and lockdown restrictions dampened property sales.
Additionally, since the lockdown restricted traffic movements, the group’s toll operations also recorded a decline in its revenue to RM20.8 mil from RM45 mil in 4Q19.
“The group’s investment holding and others segment also saw a sharp revenue fall by 93.62% to RM313,000 from RM4.91 mil a year earlier, due to decrease in revenue in its EkoCheras Shopping Mall, as well as its food and beverage activities,” the news article reported.
“For the full financial year ended June 30, 2020, Ekovest reported a net profit of RM46.9 mil, down 66.56% versus RM140.4 million a year ago. Revenue dipped 5.01% to RM1.27 bil from RM1.34 bil,” it said.
As of 9.12am today, Ekovest’s share price stood at 49 sen with a market capitalisation of RM1.30 bil. – Sept 4, 2020
