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Monday, November 17, 2014

Fitters gears up for a bite of water piping market

Source: http://www.theedgemarkets.com/my/article/fitters-gears-bite-water-piping-market

KUALA LUMPUR: Fitters Diversified Bhd plans to make inroads into the local pipe replacement market, which is potentially worth RM11 billion, with the granting of a licence by the Construction Industry Development Board (CIDB) that allows it to bid for pipe installation and replacement services locally.

“We have got the full licence for pipe installation and can instal from the smallest to the largest pipes. We can participate in government initiatives if we choose to,” managing director Datuk Richard Wong Swee Yee told The Edge Financial Daily in a recent interview.

Wong had previously indicated to reporters that the ageing pipes in Malaysia and the region offer a big potential market for the group and that it was in talks with the government regarding a nationwide pipe-replacement initiative.

“We won’t elaborate too much on this, but we are working on piping projects. Now that we are also a licensed contractor, we want to convince the government to implement non-revenue water pipings going forward,” he said, noting that studies have shown there is an estimated 47,000km of underground pipes nationwide that need to be replaced to prevent water leakage.

Some of the pipes, he said, are asbestos and were installed decades ago before Independence.

Aside from its pipe replacement plans, Wong said the group has ramped up its production facilities with a new 77,000 sq ft factory recently, which is capable of fitting seven pipe production lines. Two of them will be ready by the end of this year, while a third should be completed by the second quarter of 2015. Collectively, the three lines can produce 11 tonnes of pipes.

The capacity increase is in preparation for the group to capture 10% of the domestic pipe market by end 2015, with the aim of making the pipe business one of its main revenue generators by 2016, said Wong.

The fact that the company obtained the exclusive rights, in March, to manufacture and market Spain-based Molecor Technologia’s patented “oriented-PVC” (PVC-O) pipes in Southeast Asia, is also another good reason to ramp up production. PVC-O pipes are said to be highly impact-resistant, elastic, as well as lighter and easier to instal.

“We expect revenue of RM100 million [from the pipe manufacturing segment] by the end of next year,” he said, adding that there are “high chances” it would build three more production lines in 2016.

“By 2017, we expect to be making RM300 million worth of pipes. We are not targeting Malaysia alone, we mean to export to Southeast Asia too,” he noted.

The group has also established a distributorship arrangement and is in the process of deciding on 11 or 12 distributors nationwide to serve as its pipe stockists.

While it is enthusiastic about pipes, the key revenue contributor for the group is still its property development and construction segment, though Wong said 2015 will be a challenging year for the segment as property buyers are having problems obtaining loans.

The group is hoping that its other segments — primarily the manufacturing and installation of firefighting equipment and the new pipe business — will help mitigate any potential downsides in its property development business, he said.

On the planned listing of its renewable energy unit, Future NRG Sdn Bhd, on the Catalist board of the Singapore Stock Exchange, Wong said the exercise has taken a back seat in view of the recent poor faring of the markets.

The group plans to wait for a more opportune time before submitting its prospectus to the regulators.

“We have a few interesting renewable energy projects that we’ll announce in due course. Eventually, we will look at raising money from the market [for them],” Wong said.

Fitters closed one sen down at 75.5 sen last Friday, giving it a market capitalisation of RM362.6 million.



This article first appeared in The Edge Financial Daily, on November 17, 2014.

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