MESTRON Holdings Bhd, a leading manufacturer of specialty poles, will embark on a renewable energy (RE) trajectory with its subsidiary Liziz Biogas Sdn Bhd having received official approval from Malaysia’s Sustainable Energy Development Authority (SEDA) to kickstart effective operation of the latter’s Gua Musang plant.
This development marks a significant milestone following Mestron’s strategic move into the RE sector back in 2021. Set competitively at 39.75 sen/kW, the rate will commence from July 26, 2023 for a period of 21 years.
“Our RE segment has taken another leap forward with the effective date of the FiT (Feed-in Tariff) having taken place,” Mestron’s managing director Por Teong Eng pointed out.
“We anticipate this change to contribute an additional RM2 mil to RM3 mil annually to our group’s bottom line for the next 21 years. Diversifying from our core manufacturing business allows us to generate additional income, solidifying our position in the market.”
To put it into perspective, Mestron’s net profit in FY6/2022 stood at around RM10 mil. With the FiT rate of 39.75 sen/kW, the biogas RE business segment is poised to contribute around 20% to 30% of the group’s total income.
According to the letter received by Liziz, SEDA endorsed this revision, recognising that they have met the necessary criteria for the FiT rate.
The biogas RE segment has a huge potential for growth for Mestron. Over the next two to three years, the group aims to expand its plant capacity from current 2.4MW (megawatt) to 3.2MW.
The revised rate will translate into net earnings of around RM3 mil per annum, suggesting a strong double-digit growth over the next few years.
“Mestron is in a strong position to ride on the growth momentum in its manufacturing business, led by the rising demand for our specialty poles, mainly in the telecommunication sector,” noted Por.
“With the RE business, this allows us to generate another consistent stream of recurring income. The new FiT rate is timely and justifies our investment into the biogas RE segment.”
Added Por: “This expansion offers a lucrative prospect for the group, especially in a market increasingly leaning towards sustainable investment. We believe we will have the advantage of being one of the first movers in the market.”
Interestingly, the Liziz biogas plant is also located in a strategic location next to a palm oil mill which allows the plant to benefit from a consistent supply of raw materials, namely palm oil mill effluent (POME).
This places the plant in an ideal position to streamline waste collection from smaller mills, thus ensuring a steady flow of materials, especially during the millers’ low seasons. This also provides a competitive advantage to the group in terms of capability to expand its capacity.
At the close of today’s mid-day trading, Mestron was up 0.5 sen or 1.1% to 46 sen with 3.05 million shares traded, thus valuing the company at RM456 mil. – Aug 25, 2023
