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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
ENGTEX GROUP BERHAD
3Q14 Results & Corporate Update
Presented by :Dato’ Ng Hook, Group Managing DirectorMr. Khoo Chong Keong, Chief Financial Officer
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
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AGENDA
3Q14 Operations Review
3Q14 Financial Review
Prospects
Investment Merits
Appendix
Corporate profile
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
OPERATIONS REVIEW
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
Manufacturing segment saw uptrend in pipes and wire mesh sales and utilisation of capacity albeit affected by increased price competition in wire mesh
OPERATIONS REVIEW: MANUFACTURING DIVISIONOperations Review
Manufacturing sales increased 1.7%
yoy (3Q14: RM399.1 mil vs 3Q13:
RM392.7 mil)• Wire mesh continued to be the biggest
contributor to group revenue on the back of
sustained infrastructure/ construction/
property development works locally
• MS Pipes surpasses yoy sales in 3Q14 as
compared to 3Q13 on the back of
improved market demand.
• Demand for DI Pipes improved in 3Q14 as
compared to 3Q13, largely stemming from
both private and public sectors in Selangor,
Johor, Perak and East M’sia.
Wire Mesh
Revenue: +5.6%
Sales Tonnage: +5.4%
MS Pipes
Revenue: +0.3%
Sales Tonnage: +36.0%
Others
Revenue: -12.9% yoyDI Pipes
Revenue: +7.0%
Sales Tonnage: +6.7%
11%
24%
13%
31.4%
54.8%66.4%
38.3%
78.3%63.4%
0.0%
50.0%
100.0%
DI Pipes MS Pipes Wire mesh
Utilisation Rate of Capacity 3Q13 3Q14
(Cap: 36k mt pa)(Cap: 60k mt pa) (Cap: 162k mt pa)
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
Expanding nationwide by ramping up capacities of wire mesh facilities …to become one of the leading player in Malaysia.
OPERATIONS REVIEW: MANUFACTURING DIVISION (con’t)Operations Review
Location Production Capacity
(ton p.a.)
Ijok (Kuala Selangor) 60,000
Seberang Perai (Penang) 12,000
Gebeng (Kuantan) 18,000
Johor Bahru (Johor) 18,000
Ijok (Kuala Selangor) 36,000
Gebeng (Kuantan) 18,000
162,000
New capacity expected in
H2 2014
Kota Kinabalu (Sabah) 18,000
Johor Bahru (Johor) 18,000
Bkt Minyak, (Penang) 12,000
48,000
Total 210,000
New wire mesh facility to cater for East Malaysian market
• Investing RM7.0 mil in new manufacturing plant in Kota Kinabalu,
Sabah with capacity of 18,000 MT p.a.; production mainly catered for
the East Malaysian market. Commissioning commenced and target
commercial operation in Q1 2015.
New wire mesh facility
completed in Peninsular
Malaysia
• Investing an estimated
RM14.5 mil for additional
capacity of 18,000 MT p.a.
in Johor and 12,000
MT p.a. in Penang.
Commencement operations
in Q4 2014.
Johor Bahru plant, Johor
Bkt Minyak, Penang
Kota Kinabalu plant, Sabah
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
Group is investing btwn RM4.0mil to RM5.0mil to increase the diameter size of MS pipe
production from 2.6m to 3.0m. Upgrading completed recently.
New piling pipe plant taking shape in Gebeng
• Investing RM25 mil in new piling pipe plant with
capacity of 72,000 MT p.a. Target commencement
in H2 2015.
• 10 year tax break granted by ECER
• Cater for infrastructure works such as offshore oil rig
platform, land reclamation, seaport deepening, MRT
MS Plant upgrade in Serendah and new piling pipe plant taking shape in Gebeng …
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
Wholesale & Distribution division continues to be a leading player in Malaysia…and made up 49.5% of 3Q14 Group revenue
OPERATIONS REVIEW: WHOLESALE & DISTRIBUTION DIVISIONOperations Review
# Trading of products such for infrastructure, utilities and construction
sectors such as pipes, valves, fittings, building materials, steel products,
general hardware and plumbing products, and pre-stressed concrete products.
* Revenue presented here excludes Engtex’s own manufactured products sold through its distribution channel
Consistent positive growth of 16.9% in 3Q14, as compared to
3Q13 (+17% YoY 2Q2014)
• Group’s trading products continued to be fuelled by steel trading
activities and ongoing and new projects in the infrastructure,
utilities, construction sectors and property sector.
Valves & Fittings
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
Slow down in Group’s property segment…balance Bumi units of completed project still pending release
OPERATIONS REVIEW: PROPERTY DEVELOPMENTOperations Review
Project Name
(Ongoing)
Type Land
Area
(acres)
GDV
(RM’mil)
No. of
Units
Take-
up Rate
(%)
Unbilled Sales
(RM’mil)
(As at 30 Sept
2014)
Unsold stock
(RM’mil)
(As at 30 Sept 2014)
Project
Duration
Tiara
Residence
4-S Link Houses 3.87 84.0 46 70 0 25 2011-2013
(Completed)
Emerald
Avenue
SOHO
3 & 4-Storey Shop
Offices
Duplex
3.59 70.0
110.0
41.0
188
120
71
94
80
63
18
4
3
5
43
16
2011-2014
Total 7.46 305.0 425 25 89
• In Q3 14, the Group’s property division did not record any new property sales from Emerald Avenue
project and consequently Q3 14 revenue decrease by 34.9% QoQ to RM16.9mil.
• In Q3 14, Tiara Residence which was completed in March 2013 sold 1 unit. Balance of 13 units unsold,
of which 10 units pending Bumi release. Consequently the Q3 14 revenue increase by 22.3% QoQ to
RM4.1mil.
• Unbilled sales stood at RM25.0 mil as at 30 Sept 2014
69715891
36587
164640
52968 58511
41,059 51703
0
20000
40000
60000
80000
2008 2009 2010 2011 2008 2012 2013 3Q13 3Q14
REVENUE (RM’000)
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Gravy in the pipeline…
FINANCIAL HIGHLIGHTS
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Gravy in the pipeline…
3Q14 performance contributed from distribution, manufacturing and property development…
3Q14 INCOME STATEMENTFinancials
Comments 3Q14 3Q13 Change RM'000 FY133Q14 topline improved from
Distribution, Manufacturing and
Property divisions
893.4 812.2 10.0% Revenue 1,090.4
128.6 116.4 10.5% Gross Profit 155.5
14.4% 14.3% 0.1pt Gross
Margin
14.3%
81.1 78.0 4.0% EBITDA 100.4
9.1% 9.6% (1.5pt) EBITDA
margin
9.2%
56.2 55.9 0.5% PBT 71.3
6.3% 6.9% (1.7pt) PBT margin 6.5%
39.2 38.5 1.8% PATMI 51.2
4.4% 4.7% (0.4 pt) Net margin 4.7%
20.29 20.55 (1.3%) Basic EPS
(sen)
27.39
Effective tax rate at slightly
higher than 25%
Improved margin due to
contribution from Distribution
division which offset increased
price competition of Group's
Manufacturing division
3Q14 saw higher interest
expenses due to increased
borrowings
Higher EBITDA due to
contribution from Distribution
division which outweigh higher
OPEX in the Group's Property
division and increased price
competition of Group's
Manufacturing division
19
7.2 2
48
.8
23
1.4
24
3.2
26
9.4
27
9.3
26
3.5
27
8.2
26
0.3
33
1.3
30
1.8
0
50
100
150
200
250
300
350
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
1Q
14
2Q
14
3Q
14
Qtrly Revenue (RM'mil)
16
.5
25
.8
16
.6
8.5
27
.1
27
.5
22
.8
23
.0
22
.4
29
.4
29
.3
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
1Q
14
2Q
14
3Q
14
Qtrly EBITDA (RM'mil)
7.9
14
.7
7.7
-1.2
13
.9
14
.1
10
.4 13
.3
10
.5 14
.9
13
.9
-5.0
0.0
5.0
10.0
15.0
20.0
1Q
12
2Q
12
3Q
12
4Q
12
1Q
13
2Q
13
3Q
13
4Q
13
1Q
14
2Q
14
3Q
14
Qtrly PATMI (RM'mil)
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
47.1%
47.5%
5.4%34.6%
yoy
6.6% yoy
10.5%
yoy
3Q14 performance impacted by both distribution and manufacturing division…
REVENUE SEGMENTATION
FY13 Revenue: RM1,090.4 mil (+18.5% yoy)
Financials
43
1
29
5
36
2
43
3
48
6
51
8
2008 2009 2010 2011 2012 2013
Revenue (RM’mil)Manufacturing
1 16
37
16
53
59
2008 2009 2010 2011 2012 2013
Revenue (RM’mil)Property Development
3Q14 Revenue: RM893.4 mil (+10.0% yoy)
49.1%
320
289
282
344
382
514
2008 2009 2010 2011 2012 2013
Revenue (RM’mil)Wholesale & Distribution
49.5%
44.7%
5.8%
1.7% yoy
16.9%
yoy+25.9%
yoy
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
MS Pipes sales in 3Q14 matched strong performance in 3Q13…wire mesh performed moderately in 3Q14
REVENUE SEGMENTATION (Manufacturing Division)
FY13 Manufacturing Revenue: RM518.1 mil (+6.6% yoy)
11.6%
18.6%
17.9%51.9%24.7%
yoy
17.5%
yoy
19.0%
yoy
15.7%
yoy
Financials
84
61
60
64
83
96
2008 2009 2010 2011 2012 2013
Revenue (RM'mil)Mild Steel Pipes
20
7
13
4
17
1
22
0
22
9
269
2008 2009 2010 2011 2012 2013
Revenue (RM'mil)Wire Mesh
67
47
57
60
50
60
2008 2009 2010 2011 2012 2013
Revenue (RM'mil)Ductile Iron Pipes
73
53
73
90
12
3
93
2008 2009 2010 2011 2012 2013
Revenue (RM'mil) Others
3Q14 Manufacturing Revenue:
RM399.1 mil (+1.7% yoy)
11.4%
23.7%
51.8%
5.6% yoy
0.3% yoy
12.9% yoy
7.0% yoy
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
43.2%
54.3%
2.5%
Wholesale & Distribution Manufacturing Property Development
29.5%
74.2%
yoy
yoy
yoy19.7%
Moderately higher EBITDA in 2014 as a result of positive contribution by distribution division which outweighed increased price competition from manufacturing and higher OPEX from property division…
EBITDA SEGMENTATION
3Q14 EBITDA: RM81.9 mil* (+4.5% yoy)FY13 EBITDA: RM103.3 mil* (+47.8% yoy)
Financials
FY13 EBITDA margins: 9.3% (FY12: 7.3%)*Not excluding EBITDA of RM0.86 mil from Investment
Holdings and intersegment activities
30
24
23
36
35
45
2008 2009 2010 2011 2012 2013
EBITDA (RM'mil)Wholesale & Distribution
34
24
35
36
32 56
2008 2009 2010 2011 2012 2013
EBITDA (RM'mil)Manufacturing
-725
1,1
18
7,4
51
1,5
91
3,2
11
2,5
78
2008 2009 2010 2011 2012 2013
EBITDA (RM‘000)Property Development
37.3%
2.9%
44.4%
18.5%
yoy
-28.1%yoy
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
(RM’000) As at 30 Sept 2014
As at 31 Dec 2013
Comments
Non-Current Assets 267,120 236,589 Mainly due to CAPEX for acquisition of industrial land andbuilding, machineries, and construction of hotelbuildings.
Current Assets 814,909 698,941 Largely due to increase in inventories ($30.3m), cash at bank ($27.2m) and trade receivables ($22.2m)
Current Liabilities 529,632 465,506 Higher as a result of increased bills payable ($74.0m)
Non-Current Liabilities 119,092 93,497 Term loans increased mainly due to new drawdown of bridging loan ($14.5m), industrial land and building financing ($13.3 m) , hotel lands ($4.7m) and machineries ($4.0 m).
Shareholders’ Equity 414,448 359,627 Due to higher retained earnings and treasury shares sold ($19.1m)
Minority Interest 18,857 16,900 -
Borrowings (ST + LT) 489,816 386,676 Higher borrowing stemming from increase in trade lines ($82.2m) and term loan ($35.7m)
Cash & Bank Balances 59,320 32,131 Largely as a result of selling treasury shares
Net Debt/Total Equity (x) 0.99x 0.94x
Net Tangible Assets / Share (RM)Adjusted NTA/Share after bonus issue
2.11 (1)1.40
2.02 (2)1.35
Gearing sustained at less than 1x…
BALANCE SHEET
(1) Based on 196.4 million shares, net of 1.600 million treasury shares(2) Based on 186.6 million shares, net of 11.410 million treasury shares
Financials
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
FY2010 FY2011 FY2012 FY2013 1Q14 2Q14 3Q14
Current Ratio 1.6 1.5 1.5 1.5 1.5 1.5 1.5
Collection Period (Days) 93.6 98.2 96.3 92.9 109.2 92.2 103.0
Payment Period (Days) 27.7 33.9 40.6 36.9 39.6 35.1 37.2
Inventory Processing Period (Days) 82.5 84.7 84.9 78.4 95.6 75.9 88.6
Cash Conversion Cycle (Days) 148.4 149.0 140.5 134.5 165.2 133.0 154.4
Net Debt/Total Equity 0.66 0.87 0.87 0.94 0.93 0.90 0.99
Total Debt/Total Equity 0.76 1.00 0.97 1.03 1.04 1.05 1.13
Interest Coverage 7.8 5.5 4.6 6.2 5.0 6.1 5.1
Effective Finance Cost 3.9% 4.9% 4.3% 4.4% 4.2% 4.5% 4.7%
Fundamentals set to improve…
KEY FINANCIAL RATIOSFinancials
10.6%
14.1% 12.8%
9.7%
15.2%
11.3%
15.7%
14.3%
4.7%6.6%
5.5%3.9%
6.0%
4.4% 6.0%5.5%
0
0.05
0.1
0.15
0.2
FY2009 FY2010 FY2011 FY2012 FY2013 1Q14 2Q14 3Q14
Average ROE & ROA ROE ROA
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
Profitable since incorporation…
REVENUE & PROFIT TRENDFinancials
14
6.7
29
6.0
35
2.3
35
5.3
45
2.2
56
6.4
75
1.8
59
9.8
68
0.1
79
3.6
92
0.5
1,0
90
.4
26
9.4
27
9.3
26
3.5
26
0.3
33
1.3
30
1.8
14.9% 14.4% 14.6%
11.4% 12.5% 13.1% 13.0% 13.4%15.1%
14.0%12.6%
14.3%14.9%
14.4%
13.7%
14.5%
13.8%
14.9%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
0
200
400
600
800
1,000
1,200
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1Q13 2Q13 3Q13 1Q14 2Q14 3Q14
Group Revenue (RM'mil) and Gross Margin (%) Revenue Gross margin
8.1 13.4 16.5 5.7 8.7 19.3 33.2 24.0 35.5 37.9 30.9 55.0 15.1 15.2 11.4 11.3 15.9 14.3
10.1%8.9% 10.2%
6.3%7.3%
8.0% 8.3% 8.0%
9.4% 9.0%
7.3%
9.3% 10.1% 9.9%
8.7% 8.6%8.9% 9.4%
5.7%4.5% 4.7%
1.6%1.9%
3.4%
4.4%
4.0%
5.2%4.8%
3.4%5.1%
5.6% 5.4%4.3% 4.3%
4.8% 4.7%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
0
50
100
150
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 1Q13 2Q13 3Q13 1Q14 2Q14 3Q14
EBITDA and PAT margins
PAT Tax Finance cost & depreciation EBITDA Margin PAT Margin
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Gravy in the pipeline…
PROSPECTS
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
• Major new pipe laying projects – PAAB projects in 6 states (Perlis,
Perak, Penang, Johor, N9 and Melaka), Langat 2 Selangor, MCKIP,
RAPID Pengerang and other state authorities, etc.
OUTLOOK
Prospects
Group’s outlook still positive on the back of robust activities in both public and private sectors in Malaysia…
To benefit from numerous upcoming projects from both
private and public sectors nationwide
• Estimated 43,890 km AC pipes (>4.27 bil litre of treated water a day leaked
out) need to be replaced nationwide for approx. RM10 bil (abt 3 mil mt).
MWA put a figure of >RM20 bil to replace AC pipes or RM500k per km of
pipe which includes laying work. (Source: The Star 4/9/14)
• Malaysia sees strong growth in new pipelines (estimated to be 4,000 km to
5,000 km per annum worth approx. RM1 bil (abt 300k mt).
• About 6,423 km pipes needing to be replaced in Selangor for approx.
RM1.0 bil (350k mt); compounded by the State being one of the worst in
NRW pipeline
Tremendous potential for pipe replacement nationwide;
enormous demand for DI and MS pipes
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
OUTLOOK
Prospects
Group’s outlook still intact on the back of robust activities in both public and private sectors in Malaysia…
New national policy for non-revenue water (“NRW”) to
tackle high water loss due to be tabled by year end
• Three states with high NRWs – Perlis, Kedah and Kelantan is trying to contain the problem
• Discussions with Federal underway to receive special allocation to replace pipes, meters etc.
• Kelantan plan to reduce the NRW to 38% by next year and spent $5 mil engaging Ranhill Water
Services to curb water loss through 6,000km of water pipes statewide.
New national policy for non-revenue water (“NRW”) to tackle water loss to be
tabled by year end (Source: The Star 4/9/14)
• Pahang-Selangor Raw Water Transfer project costing RM3.93 bil is 96.7% complete and operational
by 2017 with ability to channel 1.89 mil cubic metres of raw water a day to meet demand for
Selangor, Kuala Lumpur and Putrajaya up to 2025.
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
OUTLOOK
Prospects
Group’s outlook still intact on the back of robust activities in both public and private sectors in Malaysia…
In 2013, NRW stood at 36.6% (2012: 36.4%) of all water pumped out from treatment
plants or abt 5.69 bil litre a day, and
>75% of NRW due to pipe leakages of AC pipes and infrastructure problems.
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
Growth strategies in place to broaden revenue base…
GROWTH STRATEGIESProspects
Uncharterd Waters High Flyers
New Biz Fortresses
Wire
Mesh
MS
DI
Property & Hospitality
D&W
Market Share
Ind
us
try G
row
th P
ote
nti
al MS
DI
1. Tapping into
opportunites
from govt
investment in
pipeline
infrastructure
2. Increasing
overseas
sales
1. Tapping into
opportunities
from govt
investment in
pipeline
infrastructure
2. Investing in
more capacity
if needed
3. Widening
product
application to
piling pipes
1. Investing in more
capacity to tap
construction demand
2. Increasing market
share via nationwide
presence
1. Expanding market
channel nationwide
with more dealerships
2. Widening product
range for 1-stop
service
1. Building future
recurring income from
hospitality business
2. Earnings from
property dev to
mitigate cyclical risk of
core businesses
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
INVESTMENT MERITSValuation, room to grow…
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
One of the best proxies to the water sector growth story…single digit earnings multiple an affordable entry
VALUATION
Share Price (5 Dec 2014) RM1.30
Market Cap (5 Dec 2014) ('mil) RM386.1
Trailing PE Ratio (x) 7.35
Trailing EV/EBITDA (x) 8.06
Price to Book Ratio (x)1 0.93
Net Dividend Yield (FY14)2 1.3%
1Based on adjusted NTA per share of RM1.39 as at 30.9.20142Based on FY13’s Dividend of 1.75 sen per share
Investment Merits
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Gravy in the pipeline…
Consistently paying dividends since listing…
DIVIDEND HISTORY
1.7
1.7
1.2
0.6
0.6
0.6
0.6
0.8
1.1
1.5
1.5
1.8
0
1
2
FY0
2
FY0
3
FY0
4
FY0
5
FY0
6
FY0
7
FY0
8
FY0
9
FY1
0
FY1
1
FY1
2
^FY1
3
Sen
Adjusted Net Dividend Per Share
3.0
3.0
1.2
1.2
1.1
1.1
1.5
2.1
2.8
2.8
3.3
22%
17%
20%
14%
6%
4%
6% 6%8%
10%
6%
0%
5%
10%
15%
20%
25%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
FY0
3
FY0
4
FY0
5
FY0
6
FY0
7
FY0
8
FY0
9
FY1
0
FY1
1
FY1
2
FY1
3
RM’ mil
Dividend Payout
Dividend Payout Payout Ratio
Investment Merits
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Gravy in the pipeline…
THANK YOU
Bloomberg: ENGT MK | Reuters: ETEX.KL
IR Contacts:
Mr. Khoo Chong Keong +603-6140 1111 [email protected]
Mr. Chong Thian Fook +603-6140 1111 [email protected]
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Operations Review Financial Review Prospects Investment Merits Appendix Corporate Profile
Gravy in the pipeline…
CORPORATE PROFILELeading one-stop pipeline systems provider in Malaysia…
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Gravy in the pipeline…
Strong growth catalyst from long-overdue pipeline replacement project…Engtex set to be key beneficiary
EXECUTIVE SUMMARY
• Founded in 1983, Engtex Group Berhad (Engtex) is a leading
one-stop pipeline system provider in Malaysia Well-established backbone of manufacturing and distribution arms
Mainly catering for the water & sewerage, infrastructure, and construction
sectors
• One of few players in the country with ability to manufacture
large diameter pipes; also a leading wire mesh producer The bigger player in ‘duopolistic’ Ductile Iron (“DI”) pipe sector in Malaysia
Able to produce up to 3000mm diameter Mild Steel (“MS”) pipes
Top 3 manufacturers of wire mesh and hard drawn wire
• Integrated wholesale and distribution channel with nationwide
network Largest player of non-oil & gas Pipes, Valves & Fittings (“PVF”),
plumbing materials, building materials & general hardware products
• Growth catalysts from imminent pipe replacement initiatives
(particularly in Selangor), and growing preference for DI pipes
• Single-digit valuation not yet reflecting upcoming pipe replacement
projects, dividend paying since listing
Wire Mesh
Valves & Fittings
Ductile Iron (“DI”) Pipes
Mild Steel (“MS”) Pipes
Corporate Profile
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Gravy in the pipeline…
Total market capitalisation of more than RM400 million…
EXECUTIVE SUMMARY (cont)
Engtex Group Warrants 2007/2017
Warrant Code ENGTEX–WA
Balance No. of Warrants 148,465,800 @ 5 December 2014
Terms of Warrants Expiry: 25 October 2017; Exercise price: RM0.83 each; Conversion: 1-for-1
Market Capitalisation RM78.7 mil (RM0.53 per warrant @ 5 December 2014)
Engtex Group Berhad
Stock Exchange Main Market, Bursa Malaysia- since 30 July 2002 - IPO price: RM0.54 (Adjusted for 1-for-4 Bonus Issue, 1-to-2 share split and 1-for-5 Rights Issue and 1-for-2 Bonus Issue)
Sector Trading / Services
Codes Bursa: 5056 / ENGTEXBloomberg: ENGT MKReuters: ETEX.KL
Share Capital RM148.52 mil (297.034 mil shares of RM0.50 par)
Market Capitalisation RM386.1 mil (RM1.30 per share @ 5 December 2014)
Corporate Profile
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Gravy in the pipeline…
Committed to superior quality for customers towards achieving sustainable returns for stakeholders…
CORPORATE CREDO
Mission
To be a leading integrated manufacturer and one-stop
distribution center for pipes, valves, fittings, plumbing and
steel products that provides total supply chain solution to our
customers in water supply, sewerage system, fire fighting and
construction industries
To deliver sustainably good financial returns through the
impeccable commitment on setting high standards,
innovation, productivity and competency, to provide products
and services of the world class quality and value focused
to meet the needs for customers
• Customer Satisfaction
• Safety & Environment
• Shareholder Value
• Integrity & Professionalism
• Quality Management
Vision
Values
Corporate Profile
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Gravy in the pipeline…
30 years of business expansion…
CORPORATE MILESTONES
1983 Formed Engtex Sdn Bhd as a hardware retail shop, involved in wholesale and
distribution of PVF, plumbing materials and general hardware products
1995 • Ventured into manufacturing of steel pipes, fittings and other metal-related
products. Commenced operations at end 1996
• Involved in the manufacturing of welded wire mesh, hard-drawn wire and
operating of a steel service centre
2002 • Ventured into manufacture of DI pipes, supplying mainly to water, infrastructure,
and construction sectors
• Listed on Main Board of Bursa Securities Malaysia
2004 • Completed 1:4 bonus issue of 16.5 million new ordinary shares
• Completed private placement of 6 million new ordinary shares
2007 • Completed 1-to-2 share split
• Completed listing of 1:5 rights shares of 33 million new ordinary shares with 99
million free Warrants on the basis of 3 for 5
2014 • Proposed 1:2 bonus issue of up to 148.5 million new ordinary shares
• Proposed adjustment to exercise price and outstanding warrants pursuant to
bonus issue
• Proposed increase in authorised share capital
Corporate Profile
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Gravy in the pipeline…
Primarily involved in manufacturing and distribution of water- and steel-related products…
PRINCIPAL ACTIVITIES
Hospitality
(future)
Distribution &
Wholesale
PVF and general hardware
Building materials and steel products
Pre-stressed concrete products
Property
Development
Ongoing Projects:
Emerald Avenue
New launching:
Amanja
Manufacturing
Ductile iron (“DI”) pipes
Mild steel (“MS”) pipes and fittings
Wire mesh, hard drawn wire and
steel service center
DI Valves, hydrants, fittings and manhole covers
Pipe asphalt/coatings & bitumen products
Piling pipes (future)
47.5% of FY13 revenue
47.1% of FY13 revenue
5% of FY13 revenue
Corporate Profile
Ongoing hotel development:
Mercure Hotel @ Emerald Avenue
Ibis Hotel @ Bandar Sri D’sara
Boutique Hotel @ Lebuh Pasar KL
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Gravy in the pipeline…
Manufacturing facilities complemented by wide and established distribution channel…
MANUFACTURING FACILITIES & DISTRIBUTION NETWORK
Manufactured Product Location(s) Contribution to FY13 revenue
DI Pipes Gebeng (Kuantan) 5.5%
MS Pipes Serendah (Selangor) 8.8%
Wire Mesh Ijok (Kuala Selangor), Gebeng (Kuantan), Seberang Perai (Penang), Johor Bahru (Johor), Kota Kinabalu (Sabah) 24.7%
Valves, Fittings, Bitumen &
Steel Products
Sg Buloh (Selangor) 8.5% (incl. others)
Corporate Profile
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Gravy in the pipeline…
DI pipe business profitable even at 30% utilisation… operating leverage to manifest when pipe replacements take off
MANUFACTURING: DUCTILE PIPE
• Ventured into DI pipe manufacturing in 2002 The larger of 2 DI pipe manufacturers in Malaysia; able to produce DI pipes of up to
800mm diameter
Mainly catering for the water & sewerage sectors
Scrap metal (main raw mat) sourced locally
• Manufacturing plant in Gebeng, Kuantan built on 17.5-acre land Production capacity: 60K ton p.a.
Capacity utilisation: 19.5K ton /
33% in FY13
Accredited with ISO 9001: SIRIM,
OHSAS18001:2007 (occupational
safety & health) & ISO14001:2004
(Environmental Management)
• Local & regional product compliance Peninsular Malaysia: IQCI (IKRAM), SPAN
East Malaysia: State water authorities of Sabah, Sarawak
Singapore: PSB
56% 19% 8% 4% 13%
Cost Breakdown: DI Pipe
Scrap Metal Consumables/Chemical Utilities Direct Labour Overheads/Others
Product Brands:19 16 18 20 20 20
32%27%
30%33% 33% 33%
-20%
-5%
10%
25%
40%
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013
Production Output & Utilisation Rate
Output ('000 ton p.a.) Utilisation Rate
Corporate Profile
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Gravy in the pipeline…
DI pipe vs PVCO (molecularly oriented polyvinyl chloride) pipe
MANUFACTURING: DUCTILE PIPE
• DI has >10 times the tensile strength of PVCO (73,947psi vs 6,729psi). Therefore less
susceptible to fatigue failures.
• Thermal coefficient of PVCO is approx. 5 times that of DI pipe- therefore variation in operating
or installation temperature will affect tensile strength of PVCO more than DI and will
experience undesirable structural movements such as joint buckling or disengagement due to
expansion or contraction.
• DI pipe resists up to 5.6 times the hydrostatic burst pressure of PVCO pipe. (3,900psi vs 697
psi)
• The strength of DI pipe not compromised by time of failure.
• DI pipe resists up to 41 times the short term crushing load of PVCO pipe and more for long-
term crushing load (3,959psi vs 96 psi on 6 in pipe)
• DI pipe has up to 55 times more impact strength than PVCO (22.55lb/in vs 0.41lb/in)
• Direct-tapping DI is easier, less expensive and faster than tapping PVCO- the latter requires
the use of tapping saddle.
• Energy savings – inside diameter of both DI and PVCO are very comparable, if not greater, to
allow flow capacity and lower head loss.
• PVCO is highly permeable when exposed to hydrocarbons or contaminated soil.
• PVCO require proper bedding to control deflection
• Joint deflection for gasketed PVCO is abt 2% vs up to 5% for push-on-joint DI
• Others – tracer wire, nearby excavation, buoyancy, sun exposure, scratches and performance
track record.
(Source: Ductile Iron Pipe Research Association, USA (“DIPRA”)
Corporate Profile
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Gravy in the pipeline…
MS pipe segment complementary to DI for comprehensive product range…
MANUFACTURING: MILD STEEL PIPES
• One of the largest MS pipe manufacturers in Malaysia Upgraded to produce MS pipes up to 3,000mm diameter
Mainly catering for the water & sewerage sectors
Hot rolled coil / Steel plates (main raw mat) sourced locally
• Manufacturing plant in Serendah, Selangor built on 20-acre land Production capacity: 42K ton p.a.
Capacity utilisation: 19.9K ton /
55% in FY13
Accredited with ISO 9001: SIRIM
• Products compliant nationwide Malaysia: IQCI (IKRAM), SPAN, and
water authorities in all states
Product Brand:
76% 7%
1% 3%
14%
Cost Breakdown: MS Pipe
HRC/Steel Plate Consumables/Chemical Utilities Direct Labour Overheads/Others
Corporate Profile
13 11 13 15 19 20
36%31% 35%
42%53% 55%
-20%
-5%
10%
25%
40%
55%
70%
0
5
10
15
20
25
2008 2009 2010 2011 2012 2013
Production Output & Utilisation Rate
Output ('000 ton p.a.) Utilisation Rate
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Gravy in the pipeline…
Wire mesh segment aiming to be the largest player in Malaysia…
MANUFACTURING: WIRE MESH
Product Brand:
• One of top 3 wire mesh manufacturers in Malaysia Mainly catering for construction and infrastructure sectors
• Strategically-located manufacturing plants catering to specific regions
Currently building 18K MT wire mesh plant in Kota Kinabalu (Sabah); targeted for
completion by end-2014, and adding 30K MT in Peninsular Malaysia
Accredited with ISO 9001:SIRIM
• Products compliant with Malaysia quality standards MS 145:2006
Location Production
Capacity
(ton p.a.)
Ijok (Kuala Selangor) 96,000
Seberang Perai (Penang) 12,000
Gebeng (Kuantan)* 36,000
Johor Bahru (Johor)* 18,000
Total 162,000
48 43 50 60 79 109
67%60% 49%
56%73% 67%
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
20
40
60
80
100
120
2008 2009 2010 2011 2012 2013
Production Output & Utilisation Rate
Output ('000 ton p.a.) Utilisation Rate
Corporate Profile
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Gravy in the pipeline…
Undisputed cost leader in PVF distribution…
DISTRIBUTION: VALVES & FITTINGS
The top PVF distributor in Malaysia Large revenue base and wide distribution channels allow for cost leadership
Diverse product range of 150 product categories with >5K SKUs
• In-house brands make up about 40% of product range
• Others are sourced from >300 local and foreign suppliers
>4K customers in Malaysia and overseas
Products compliant with Malaysia and International standards Peninsular Malaysia: IKRAM, SPAN, JKR Standard
East Malaysia: State water authority of Sarawak
Singapore: PSB
Product Brand: Other brands distributed by Engtex: (Valves, Fittings, Steel Products, Construction Materials, etc)
Corporate Profile
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Gravy in the pipeline…
Key management possess many years’ experience…
KEY MANAGEMENT
• Group founder with 40 years’ hands-on experience in the hardware and PVF industry
• Provides the Group’s strategic direction
Dato’ Ng Hook
Group Managing Director
• 30 years’ experience in hardware industry
• Instrumental in business development, procurement of new distributorships and developing in-house brand products
Ng Chooi Guan
Executive Director
• Held administrative positions and managed own business prior to joining Engtex
• In charge of monitoring daily credit control and cashflow, monitoring debtors’ collections and treasury functions
Datin Yap Seng Kuan
Executive Director
• Been with Engtex since 1985
• Currently responsible for sales and marketing of a manufacturing subsidiary
Ng Yik Soon
Executive Director
• Been with Engtex since 2001
• Overall in charge of the accounting affairs of the Group
• Joint company secretary
Khoo Chong Keong
Chief Financial Officer
Corporate Profile