PTT Synergy aims to be a high-tech industrial solutions provider
12 Jun 2024
WITH the implementation of the China Plus One strategy, expansion of third-party logistics (3PLs) and space upgrades, along with growth in sectors such as electrical and electronics (E&E), pharmaceuticals and medical devices, cold chain logistics and automotive, the demand for industrial warehouses has surged.
PTT Synergy Group Bhd (KL:PTT), a construction company that also provides warehouse solutions and distribution centres, is planning to distinguish itself from other players in the logistics space by transforming into a high-tech total intralogistics and industrial solutions provider.
Its founder, joint controlling shareholder and managing director Teo Swee Phin says demand for warehouse space remains high, with manufacturers being the main drivers as they expand their logistics space.
“We wish to transition to a company with sustainable earnings for our stakeholders and become an ‘A’ Class industry leader in high-technology industrial solutions, not just locally but also regionally,” he tells The Edge in an interview.
PTT has three main business segments: (i) construction; (ii) industrial property development and warehouse and logistics; and (iii) trading of building materials.
The group specialises in developing built-to-suit automated industrial warehouses featuring Automated Storage and Retrieval System (ASRS) technology, which consists of a variety of computer-controlled systems for automatically placing and retrieving loads from defined storage locations.
“As a construction company specialising in earthworks and infrastructure works, we leverage our expertise to enhance the cost efficiency of our industrial warehouse development projects,” says Teo.
PTT staged a turnaround with an annual profit of RM8.41 million in the financial year ended June 30, 2022 (FY2022), from a net loss of RM1.09 million in FY2021. However, its bottom line declined by a sharp 81% to RM1.59 million in FY2023. In the nine months ended March 31, 2024 (9MFY2024), the group reported a net profit of RM7.68 million,which is 16.68% lower than a year ago.
Teo says the significant drop in PTT’s earnings in FY2023 was primarily due to the accretion of interest on deferred trade payables of RM3 million — associated with the group’s industrial development projects — and a one-off corporate exercise cost for the acquisition of Pembinaan Tetap Teguh Sdn Bhd (PTTSB).
“Looking ahead, we anticipate a positive revenue and profit growth over the next three to five years, driven by enhanced operational efficiencies and the maturity of our ongoing industrial property developments,” he says.
In FY2023, PTT’s construction division remained the group’s largest revenue contributor, accounting for 70% of its turnover. The trading division accounted for 29% of its total revenue, while the industrial property development and warehouse and logistics division contributed 1%.
“We expect our construction division to continue to be the main driver for our core earnings in the short term. In 9MFY2024, the construction division accounted for 82% and the trading division 18% of total revenue.
“We expect construction to contribute 70% to FY2024 total revenue; with 15% from industrial property development and warehouse and logistics; and another 15% from the trading division,” Teo estimates.
On the construction front, PTT clinched a RM299 million contract in March to build a bridge and connecting roadworks from Tumpat to Kota Bharu, Kelantan, before it went on to secure two earthworks contracts from Sime Darby Property Bhd (KL:SIMEPROP) totalling RM169.8 million in May. On average, gross margins for the group’s construction division are between 15% and 20%.
For FY2025 to FY2027, PTT expects its industrial property development, warehouse and logistics segment to grow as there are more industrial property projects featuring advanced technology in the pipeline, supported by increasing demand for efficient supply chain solutions and warehouse spaces.
“We remain highly focused on industrial development projects as they are a core part of the group’s businesses. Our strategic pivot and investment in these areas are in line with government initiatives to promote advanced technologies and automation in order to reduce reliance on labour,” says Teo.
Apart from the ongoing Tropicana Industrial Park in Johor, PTT has five more industrial property development projects in the pipeline, consisting of smart warehouses equipped with ASRS technology and other automated solutions, with a monthly capacity of 237,000 pallets, over the next two years, which could accelerate the group’s earnings in the coming years.
System pallet serves as the structural foundation for the efficient handling and storage of unit load systems. Tenants for these projects are diversified across growing sectors in the 3PLs providers, fast-moving consumer goods (FMCG), semiconductor, E&E and commodity space.
In March, the group held a groundbreaking ceremony to launch its first smart warehouse development in PTT Logistics Hub 1 at Sime Darby Property’s Elmina Business Park, Shah Alam, Selangor. With an estimated gross development value of RM145 million, the project is expected to be completed in the fourth quarter of next year.
On May 23, PTT announced it had entered into a non-binding letter of intent with a prominent multinational corporation (MNC) based in the northern region of Peninsular Malaysia that specialises in semiconductors.
Under this agreement, PTT will develop a built-to-suit automated warehouse equipped with comprehensive Internet of Things and artificial intelligence technology and lease it to the MNC in Penang. This state-of-the-art infrastructure, encompassing a built-up area of 401,701 sq ft, will feature an ASRS with an annual capacity of 552,000 pallets.
Change of ownership in 2020
PTT, previously known as Grand Hoover Bhd, saw a change of ownership in 2020/21.
Aim Tetap Teguh Group Sdn Bhd (ATTG) — jointly owned by Teo, his elder brother Teo Swee Leng (PTT deputy chairman) and Datuk Abd Rahim Jaafar (PTT executive chairman) — surfaced as a substantial shareholder of the company with a 17.07% stake in October 2020.
Following a rights issue, which raised RM30 million in September 2021, ATTG became the controlling shareholder of PTT with a 57.91% stake.
As at Oct 2 last year, the trio’s private vehicle owned 55.96% equity interest in the company. At the same time, the Teo brothers collectively owned direct stakes of 18.08%.
PTT’s top 30 largest shareholders include Fortress Capital Asset Management (M) Sdn Bhd and Tradeview Capital Sdn Bhd.
Teo says PTT’s management team has been “continuously laying strong fundamentals” since the new major shareholders took over the company in 2021.
“We position ourselves differently from other Bursa Malaysia-listed stocks, as a unique total intralogistics solutions provider specialising in developing industrial warehouses featuring ASRS technology.
“Coupled with our strategic growth initiatives, we are optimistic that if the company continues to demonstrate strong financials, growth potential or strategic initiatives, it could support further appreciation in stock price,” he says.
Shares gaining traction
Over the past month, shares of the Main Market-listed PTT jumped 77.24% to close at RM2.18 last Thursday, giving it a market capitalisation of RM436.9 million.
“From the perspective of market trends, if there is rising interest in construction and property stocks on Bursa Malaysia, it could positively impact PTT’s stock price, especially if investors perceive it as belonging to a similar sector or benefiting from similar market dynamics,” Teo says.
As at end-March, PTT’s net debt stood at RM319.8 million, with net gearing at 1.76 times.
Teo acknowledges that PTT’s increased borrowings over the past years were due to “strategic borrowing aimed at accelerating the development” of the group’s key projects, as well as the acquisition of PTTSB in August 2023.
“We are vigilant about our leverage and are considering optimising our debt profile through ongoing private placement and land disposal exercises when the time is ripe,” he says.
In March 2023, the group completed a private placement and raised RM9.63 million cash by issuing nine million new shares at RM1.07 apiece.
In August that same year, PTT acquired the entire equity interest in PTTSB for RM152 million. The acquisition was deemed a related-party acquisition given the substantial ownership and directorial overlap between PTT and PTTSB.
Later in October, PTT proposed a private placement of up to 36 million new shares, representing 20% of its share base. The issue price for the third tranche of the placement shares was fixed at RM1.11 each.
PTT said the acquisition was to consolidate the private construction business and construction-related assets of major shareholders into the group. The move effectively eliminated the potential conflict of interest between the group and its major shareholders while aligning the interests of the group and PTTSB in future construction projects.
Source: The Edge Malaysia
