Xin Hwa looks to provide cargo transportation in Indonesia

TheEdge Mon, Jul 29, 2019 09:03am - 4 years View Original


KUALA LUMPUR: Integrated logistics services provider Xin Hwa Holdings Bhd, which primarily bases its operations around Malaysia and Singapore, is eyeing contracts from the Indonesian government as it looks to expand its geographical footprint across the region.

As Malaysia’s market conditions remain subdued, coupled with rising competition, Xin Hwa said the management has agreed to expand its offering to new territories where projects are expected.

“In Indonesia, the government’s proposal to relocate the country’s capital to Kalimantan would provide us with opportunities. We foresee there will be big infrastructure projects there in the near future which will require logistic support and this is a space we can tap into,” said Xin Hwa managing director Ng Aik Chuan.

He said Xin Hwa is also looking to tender for work in upcoming mass rapid transit (MRT) projects undertaken by the Indonesian government.

“So far we have not yet received a contract from the government, but we do hope to in the future. For now we serve Indonesian commercial users there,” Ng told The Edge Financial Daily.

Apart from tapping into a new territory, the Johor-based group has been serving Peninsular Malaysia with a 90% contribution to top line, coupled with a 10% contribution from Singapore.

The group specialises in land transportation which accounts for 90% of its revenue contribution. It comprises cargo transportation and container haulage services.

Xin Hwa has a fleet size of 1,500 trailers, prime movers and trucks with in-house capabilities to fabricate, manufacture and provide maintenance for its fleet of prime movers.

A further 10% revenue is derived from its warehousing and distribution services. Xin Hwa recently ventured into the e-commerce business-to-business segment, but its contribution is currently insignificant.

Much of the group’s contracts are derived from large scale government infrastructure projects such as the MRT2 (MRT Line 2) and LRT3 (Light Rail Transit Line 3) in the Klang Valley.

In its current order book, the group has locked in RM13.7 million from the MRT2 project, as well as RM21.5 million from a bus station project in Singapore.

“We also received a RM16.8 million contract for the LRT3 project but as this has been put on hold, we are not depending on this amount yet,” said chief financial officer Kok Poh Fui.

“Other than the government’s megaprojects, we also get commercial projects as well, such as in the oil and gas industry, fast moving consumer goods, electrical and electronics and for heavy steel structures. We are also waiting for the tender to come out for the ECRL (East Coast Rail Link) and HSR (Kuala Lumpur-Singapore high-speed rail) projects,” said Kok.

The group is positive that its order book will contribute to the group’s financial year performance this year and the next.

Kok said the group is also optimistic about performing better in financial year 2020 (FY20) than previously with a target to achieve a double-digit growth in top line, while bottom line is also expected to be positive.

For FY19 ended March 31, 2019, the group made a profit of RM1.66 million, down 84% compared with RM10.38 million in FY18. The decline was attributed to impairments on goodwill, development costs, property, plant and equipment, as well as adjustments on accounting standards.

Revenue, however, rose by 5% to RM114.73 million versus RM109.07 million previously.

“With the impairments and accounting standard adjustments out of the way, we are positive we can do better this year (FY20),” said Kok.

In terms of capital expenditure, Xin Hwa expects to spend RM88 million this year which will be used for general working capital as well as to buy new land in Pasir Gudang, Johor, which will be used for future warehouse expansion.

“We have good experience in how to get business in warehousing, and how to get good returns from it. For now, our Malaysian operations still need more warehouses,” said Ng.

The group currently have two warehouses in Pasir Gudang with a combined size of 400,000 sq ft. It also has a 184,000 sq ft warehouse in Kempas, Johor.

“We are now in the midst of building our fourth warehouse in Shah Alam, which will be 300,000 sq ft and will be ready in the middle of next year,” said Ng.

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Yap Mei Wven
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Tomorrow no share market, wed only have....
John Ooi
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will fly 2moro.

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