Brem ... Nov 2008

It is understood to have emerged as the front runner to bag a Rm600 million contract to build a 12km road which forms part of the South Klang Valley Expressway. The company is understood to be close to securing a letter of intent from the Works Ministry, but it is not known when exactly the job will be awarded.

Sources say the high cost of the road project is due to the ‘soft terrain of the proposed highway, which would entail more reinforcement work.

It is not clear if Brem will shoulder the job alone or rope in partners to assist in the relatively large undertaking.

The SKVE is a 40km highway linking Pulau Indah on the west coast to the interchange of the Damansara Puchong Highway. The SKVE project was valued at RM1.1 billion, and was given to Muhibbah Engineering in July 2008.

It is unclear how large a margin the contract may hold for Brem, but it is unlikely to be significant.

About Brem …

For its 1QFY2008 ended June 2008, it posted a net profit of RM3 million on the back of Rm32 million in revenue. The strong profits in 1QFY2008 was a result of the disposal of Kelana Brem Towers for RM25.7 million.

The company’s profit generators are its property development arm and its water concession business, which accounted for some 87% of gross profits. This could change with the new contract.

Brem’s main construction arms are Brem Construction Sdm Bhd and Brem Maju Sdn Bhd in which the company has 82% and 50% equity, respectively. Its water division operates mainly in Papua New Guinea, where it has a 51% stake in PNG Water Ltd.

Most of its property development businesses are parked under its 75% owned Harmony Property Sdn Bhd and wholly owned Naga Istimewa Sdn Bhd. It also has a property company, Brem Zhuhai Investment Ltd, incorporated in China.

How Brem will undertake a job of this size remains to be seen. As at end June 2008, Brem has cash bank balances and short term depositors of about RM22.3 million, while its trade and receivables amounted to Rm62.7 million. Its current liabilities, namely trade receivables and bank borrowings, amounted to about RM60 million.

Brem’s cash flow positions as at end June 2008 was Rm14.1million, down from RM42.7 million a year earlier.

The company’s largest shareholder is Khoo Chai Kaa, whoc is the MD of Brem and controls 27.5% of the company’s equity, via direct and indirect stakes. Lembaga Tabung Haji emerged as a substantial shareholder in Oct 2007, with a 5% stake but has since upped it to 6.4% in early 2008.

It is not clear if Brem us looking to raise funds from its shareholders to take on the job.

At present, the only announcements to Bursa Malaysia seems to be that of share buybacks.