冷眼心水股

Willowglen sees exciting times ahead (The Edge weekly)

WILLOWGLEN MSC Bhd is getting busier. Despite a global slowdown, the supervisory control and data acquisition (Scada) system provider has bagged a number of contracts in the last four months.

Managing director Wong Ah Chiew says the group has an outstanding order book of more than RM160 million, giving strong revenue visibility in the coming years. Of this, about 70% are jobs in Singapore.

But the group is not resting on its laurels and is still looking for more contracts.

According to Wong, Willowglen is currently bidding for RM408 million worth of projects, which are mainly to supply industrial automation solutions as well as Scada systems to companies in Singapore. It recently teamed up with Singapore’s Catalist-listed security service provider Secura Group Ltd to expand its security service markets in Malaysia and Singapore.

“According to our records, we can secure about RM150 million worth of jobs each year to sustain our revenue and I don’t see the job growth slowing down,” Wong tells The Edge in an interview.

However, the order book growth is not reflected in Willowglen’s share price. The stock has fallen 15% since it hit a high of 82.5 sen on Nov 18 last year. It closed at 70 sen last Thursday, giving the group a market capitalisation of RM170.33 million.

Wong, however, remains unfazed as Willowglen is looking forward to better earnings growth in FY2017, supported by its RM160 million outstanding order book.

For FY2016, he expects the group’s financial results to be flat because several projects in Singapore were delayed.

The group’s net profit rose 3.9% to RM18.09 million in FY2015 from a year ago due to a higher turnover and contribution from its newly acquired associate company in Canada. Revenue rose to RM119.27 million from RM109.75 million.

In 1HFY2016, Willowglen’s net profit and revenue were flat at RM7.62 million and RM58.48 million respectively. The group’s Singapore operations accounted for 62.78% of its revenue while its Malaysian operations accounted for the remaining 37.22%. Revenue from the Malaysian operations saw a 31.92% year-on-year increase while that of the Singapore operations fell 14.73%.

“Project delays are unavoidable, but if we have many ongoing projects, the impact will not be significant,” says Wong.

As the group traditionally performs well in the second half of the year, he expects Willowglen to end the year with a small increase in net profit and revenue.

Come FY2017, it will be exciting times for Willowglen.

Wong expects the joint venture (JV) with Secura to start contributing to its bottom line in FY2017 with the commencement of two security solution projects in Johor.

“The two projects could be infrastructure facilities for specific activities … the value is expected to be substantial,” he says without elaborating.

Last month, Willowglen announced its 50:50 partnership with Secura to provide cybersecurity, homeland security, security consultancy, security systems integration and other security products and services in Malaysia and Singapore.

Wong says the collaboration will enable Willowglen to venture into new areas such as cybersecurity, and eventually expand to new regional markets.

He sees tremendous potential for cybersecurity as CyberSecurity Malaysia has said the industry in Malaysia could grow to RM8.8 billion by 2020.

“The JV will combine our strengths. For instance, Secura has the expertise in cybersecurity and manpower deployment while Willowglen has a proven track record in the industrial and infrastructure space,” Wong says.

Willowglen is also looking at three new areas — power substation monitoring system, hospital monitoring system and intelligent traffic system — to boost its earnings.

Wong says Willowglen, which is in a net cash position of RM39.93 million, will reserve its funds for bigger projects, acquisitions and regional expansion in the future.

“We are now in talks with two companies. We hope to clinch a good M&A deal to boost Scada opportunities in sectors such as shipping and oil and gas, which we are not actively involved in,” he says, adding that the group is open to foreign and local parties.

Last month, Willowglen incorporated a new subsidiary — Willowglen Vietnam Co Ltd — to carry out design, supply, consultancy, installation and engineering services as well as maintenance of computer hardware and software.

The group is also eyeing markets in Vietnam and Myanmar. Wong says the group will look for a JV partner in Vietnam to tap opportunities there.

Meanwhile, Willowglen is not giving up its Indonesian venture, which was set up four years ago, although it is unprofitable.

“Our marketing team in Singapore is currently re-strategising the business strategy and operations in Indonesia and we hope the Indonesian operations will contribute to the group’s bottom line in the next financial year,” Wong says.

With many plans in the pipeline, one thing is certain — Willowglen will maintain its dividend payout ratio of 20% of its net profit in the coming years, he says.