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Saturday, February 23, 2013

Pestech goes global


Technology firm aims to be as reputable as Siemens and ABB.
TODAY'S successful technology stories tell us that there is an almost assured way to build a world-class company: zero in on a new or exclusive technology, develop a cutting-edge product, and move fast to grab market share.
What happens when you do the exact opposite? Like latching on to an old or established technology, produce goods which are not very different from what is available, and try to compete in a market where there are already established players?
What are your chances of success? Or would this clearly be a case of misguided corporate bravado?
Consider the case of Pestech International Bhd. It builds facilities to transmit electricity produced by power stations. The industry is a mature one and the technology involved has not changed much over the years. Globally, the industry is dominated by a number of well-known international companies such as Siemens, ABB, Alstom, Toshiba, Mitsubishi and Hyundai.
Pestech is a relatively new homegrown company which first ventured overseas in 2007. In a number of international tenders recently, it won out over some of these more established names, proving that it can be as competitive overseas as it is at home.
The proportion of foreign income as a percentage of its total income has grown from 27% in 2008 to 45% in 2009, 51% in 2010, and 77% in 2011 when total topped RM131mil.
How has Pestech been able to take on the big boys and still come out on top?
Filling a forgotten niche
Paul Lim, chief executive officer of the group, says there is no secret to it. It is a matter of trying to work harder and smarter, and finding a niche where you can perform better than your competitors.
“We call ourselves an integrated power technology company. We specialise in the design, procurement and installation of high voltage substations, transmission lines and laying power cables. This business and the technology behind it have been around a long time there is no mystery to it.
“But what we are able to do is to deliver this whole package the designing, the engineering and the implementation on very competitive term, integrating the best technologies in the industry for the benefit of the customer.
“And so long as we are able to maintain this competitive edge, our opportunity to grow is almost limitless because the demand for electricity is increasing all the time, and so will the need for the accompanying infrastructure,” Lim adds.
He concedes that Pestech currently has no equivalent local competitor in its line of business not in Malaysia, or even in the Asean region. There are a number of electrical contractors offering their services, but no engineering company capable of delivering the full range of engineering services and products for electrical systems from design to procurement to full project implementation.
Surely, this must be one of the unsolved mysteries of the electricity industry? After all, the technology has been available all this while, the demand for transmission infrastructure has been self-evident, and yet no other significant player has emerged on the local scene.
How does one explain this void?
“It is a question I have often also reflected on,” Lim said. “I think in many ways you can say that the electrical business was a “forgotten” business largely because no one imagined that there could be a role for entrepreneurs in it.” He talks with the experience of someone who is familiar with the industry, having worked as an electrical engineer for MNCs before joining Pestech.
“We saw this niche and the entry of Pestech into this business was a very deliberate and carefully planned move. We have since grown step by step in the way we wanted,” Lim said.
“Pestech was founded by my uncle, Lim Ah Hock, a mechanical engineer himself, who is now the executive chairman of the company. It began business in 1991 as a trading house selling electrical products. In 2000, I joined the company and we transformed the company into one that specialises in the design, installation and commissioning of high voltage electrical power substations. We then went on to build transmission lines and lay power cables, finally becoming a full-fledged power grid builder”.
The company's main customer in its early days was Tenaga Nasional Bhd. By 2007 the management felt confident that it had the technical expertise and the experience to bid for jobs overseas.
The company won its first overseas contract that year in Brunei. Since then it has been awarded contracts in Cambodia, Papua New Guinea, Sri Lanka, Ghana and Tanzania.
The company's revenue has increased steadily from RM43.3mil in 2007 to RM51.6mil in 2008, RM86.6mil in 2009, RM114.9mil in 2010 and RM130.9mil in 2011. Competitive edge
Lim cites three main reasons why Pestech has an edge when it bids for projects: First, it offers customers a “complete” solution, ie it undertakes to do the whole job, from designing to supplying, manufacturing, installation, testing and commissioning. This increases efficiency and eliminates the customer's need to appoint different parties for different parts of the project.
Second, it offers customers an “open” solution. Lim says Pestech's practice is to recommend equipment that is best suited to its customers' needs and is under no obligation to recommend any particular brand of equipment. This role as an “integrator” enables Pestech to offer its customers what Lim describes as an “optimum” package. In contrast, MNCs that compete for jobs tend to recommend the use of their own brand name products, and this can limit their competitiveness.
Thirdly, Pestech now has a proven record of successful work done overseas for clients in the public and private sectors. Lim says: “This reputation is critical to our future business.
“But make no mistake,” he adds. “We are not saying we are in the same league as companies like Siemens or ABB or Hyundai. But across a broad range of customer requirements, we are as skilled and as adequately equipped as any of these companies to deliver, and we have proven this many times in the last few years.”
Growth prospects
Pestech was listed on Bursa Malaysia in May last year. Lim says the exercise has given the company a higher profile and the opportunity to secure more business. Its order book is now three times that of 2011, and he expects the momentum to continue.
“Our focus will continue to be on doing business in developing countries, both in Asean and in other parts of Asia as well as Africa.
“Right now, for example, we are bidding for a number of projects in Laos and Myanmar. The business potential in both countries is tremendous, and we feel we are well-positioned to provide the services and facilities they need,” Lim says.
Lim says the Asean region will be significant growth area in the next few years and demand for electricity will increase. “We certainly look forward to doing more business in the countries nearby,” he adds.
“Africa is another big market. We have done work in Tanzania and in Ghana our client was a major mining company. So we are no strangers to Africa and we expect to be busy in that continent too.
“So overall, we project that power grid infrastructure demand in all these markets will grow, and we will grow with it. We expect that most of our project income will be sourced from a fairly diverse base of customers”.
Pestech also wants to increase its non-project income. This comes from the sales of equipment produced in-house that are used in electricity transmission systems and sub-stations. It already manufactures a number of own-brand products and is seeking to enter into technology agreements with established suppliers to manufacture products under licence.
“The sale of these products contributes to about 20% of our earnings at the moment. Our target is to bring this up to 35%-40% within five years,” Lim adds. A global company
How big are Pestech's ambitions?
“The utilities industry is a very conservative industry,” Lim said, “and its growth depends very much on demographics and the growth rate of economies. But we know that the demand for electricity will increase, so the demand for the kind of services we offer will also increase.
“The stable technology in this field works in our favour because it allows us to grow and catch up with the big boys.
“What we are doing in Pestech is to inject an entrepreneurial element into this business. Today we believe we are the largest homegrown EPCC (engineering, procurement, construction and commissioning) in South-East Asia in the power grid building industry.
“We hope that in the course of time we can become a truly global company with a brand name as reputable as that of companies like Siemens and ABB.
Research for this article has been supported by the Ministry of International Trade and Industry.

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