Salcon Engeineering ... Sept 2008

It hopes to secure its first job in India next year (2009). They’ll be working with conglomerates like the Satyam Group and Tata Group.

Salcon’s order book has swelled close to RM1.1bil, of which RM787mil is the unbilled portion. Projects accounted for 85% of the order book while the balance is from long-term operate and maintenance (O&M) jobs.

O&M is an attractive segment as it gives recurring income. They’re looking at expanding in this segment. The company was in negotiation and tendering for new contracts worth some RM1.5bil both in Malaysia and overseas. The group hopes to achieve a revenue ratio of 40:60 between construction jobs and concessions.

Salcon, which currently operates in five countries, has the most concessions in China.

It has also made headway in Sri Lanka after securing three projects worth RM139.4mil. The jobs were funded via multi-lateral agencies such as the Asian Development Bank, which reduced payment risks.

Indonesia, on the other hand, will require some time before the projects would materialise due to the political situation in that country.

The company has taken a holistic approach to reducing non-revenue water (NRW), which is cheaper for clients while tackling the issue effectively. It’s expensive to change all the pipes. Its approach includes mapping out the entire pipe system and determining the problematic points and address them accordingly. There were many opportunities to tap the NRW segment as clean water sources become more scarce and governments strive to achieve higher efficiency.

Membrane technology is one way forward as less and less clean water is available.
The technology, which uses a filtration system, treats highly polluted water to make it usable again. While operational cost was high as electricity was used to power the pumps, the investment could be recovered in about two years. The capital expenditure would depend on the size of the plant and the quality of raw water. Such technology was widely used in the Middle East. They have secured the support of membrane suppliers and hope to set up at least a pilot plant within a year.

Its overseas contracts usually include a variation price claims clause, which help to defray the risk of rising raw material prices.

Now (2008) that the company had cleaned up its balance sheet and cleared most of the bad debts, it could maintain its focus on securing jobs that would sustain earnings.