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Posted Jan 10, 2023, 3:09 AM
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MALAYSIAN INVESTOR
ASEAN 2023
Part 4: Indonesia | Aneka Jaringan Holdings Bhd
Aneka unit to increase capacity in Indonesia
By John Gilbert - January 9, 2023 @ 7:37am
Quote:
KUALA LUMPUR: Construction player Aneka Jaringan Holdings Bhd (AJH) will increase its capacity in Indonesia this year to actively tap more projects given the country's growing infrastructure needs and the development of the new capital, Nusantara.
Managing director Pang Tse Fui said the company have been increasing its capacity in Indonesia annually as it sees positive that can be capitalised on.
Over the years, AJH's Indonesian subsidiary, PT Aneka Jaringan Indonesia (PTAJI), has been making headways in securing new projects.
"Our Indonesian subsidiary PTAJI started with public sector infrastructure projects but has also moved into the private sector.
"The company secured approximately RM25.87 million in new projects for FY22, with the largest project of RM14.72 million being the Sky House Alam Sutera project, a private sector project.
"However, we will still monitor current ongoing Malaysia projects and will be tendering for projects in Malaysia that have better margins," Pang told The New Straits Times.
Pang pointed out that Indonesia has many opportunities, given its position as Southeast Asia's largest economy and country.
"Demand for private sector construction and civil infrastructure work across the entire archipelago will support our business expansion.
"The decision of the Indonesian government to relocate the capital to East Kalimantan from Jakarta on the island of Java opens up many opportunities as there is a need for construction of new public infrastructure, government offices and housing for 1.5 million civil servants.
"This does not include housing and commercial buildings for people who will flock to East Kalimantan as the new capital becomes a growing metropolis.
"As PTAJI has been increasing its capacity annually, we foresee Indonesia's demand will grow and allow us to expand faster," he said.
Pang said the Indonesian operations under PTAJI will remain a key contributor to the AJH's earnings in the coming years as the Indonesian market presents ample opportunities, especially in Java, Sumatra and Kalimantan.
On the domestic market, Pang said projects in Malaysia in FY22 amounted to RM113.47 million, which is from the private sector.
Additional projects totalling RM52 million were secured in the first few months of FY23, also from the private sector.
"In terms of public sector projects, we had completed two sections of the East Coast Rail Link (ECRL) in Kelantan and Kuantan in FY22, while our works for the West Coast Expressway (WCE) is currently still ongoing.
"While the 12th Malaysia Plan does not emphasise multi-billion ringgit civil infrastructure projects as much, we are looking towards the RM50 billion MRT3 project and ECRL on the west coast.
"We are also hopeful for the revival of previously cancelled projects such as the High-Speed Rail (HSR)," Pang said.
Touching on challenges, Pang said the company's primary risk is rising raw material prices related to building materials such as steel rebar and concrete that would expose margins to price volatility risks.
The lingering effects of the global supply chain disruptions caused by the Covid-19 lockdowns in 2020 and 2021 continue to have an impact, and the disruptions in 2022 from, up until recently, the lockdowns in China and the ongoing Russia-Ukraine conflict have exacerbated price volatility and the ringgit's weakness, he said.
"Further, the labour shortage is another risk we have been facing. We are now replenishing the workforce after being granted a quota of 150 foreign workers by the government in September 2022.
"We expect to reduce labour costs by reducing dependency on more expensive outsourced workers. This will help us to be more competitive in the face of rising costs," Pang said.
"We are very selective in our tendering process, considering a wide array of factors such as the project's complexity, duration, pricing and also the quality of our potential clients as that would affect our cash flow," he said.
As of 31 October 2022, AJH's current order book stands at RM145.73 million, with projects in Malaysia contributing RM138.97 million and projects in Indonesia contributing RM6.76 million.
The company's current tender book, as of 31 October 2022, stands at RM969.45 million, with RM873.85 million in tender contract sums within Malaysia, while the balance of RM95.60 million in tenders is in Indonesia.
In terms of new projects in Malaysia, AJH has started Phase 1 of the Kota Semarak project and one new project with a contract sum of RM52.00 million.
In Indonesia, PTAJI has begun working on three new projects where the total contract sum is approximately RM6.59 million.
AJH's Malaysian operations remain key revenue contributors, accounting for 93.91 per cent, 92.03 per cent, 92.77 per cent and 85.26 per cent of total revenue for FY19, FY20, FY21 and FY22, respectively.
The company sees that the construction sector continues to play an essential role in economic growth, especially in need for residential, commercial and industrial property construction.
"Our operations in Indonesia contributed 6.09 per cent, 7.97 per cent, 7.23 per cent and 14.74 per cent of total revenue for the FY19, FY20, FY21 and FY22, respectively," Pang noted.
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https://www.nst.com.my/business/2023...city-indonesia
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