Protasco - Updates

Protasco just declared a single tier final dividend of 5cents per share for the financial year ended 31 December 2009 bringing the total dividends to 9 cents for year 2009. Based on the current price, the dividend yield is around 9%. A good dividend yield will act as a good buffer and more importantly, putting less stress to your emotional well being if market retrace or come under pressure.

 New updates from the HCM Engineering (Protasco's main subsidiary) website below,

 HCM Arabia to Complete Libya's TBW Project Ahead of Schedule (source: HCM website) 

HCM Arabia (HCMA) is expected to complete its Tarhona-Ben Waled (TBW) road maintenance project ahead of schedule. It wants to hand it over to Libya’s Road and Bridges Authority (RBA) before the country’s 41st Al-Fatah Revolution Anniversary.

HCMA is wholly-owned by HCM Engineering Sdn Bhd.

In an interview, HCMA Director Dr Akram Agil said it is expected to be completed in early August 2010. The Anniversary falls on 1 September. He added that this would also put the company in a favourable position to secure a new tender to expand the 88km single carriageway to a dual carriageway.

Dr Akram’s smile has an unmistakable positive signal…

First, in respect of logistics, experience, base camp, staff, asphalt and quarry, HCMA is undoubtedly entrenched there. Second, it has the biggest fleet of machinery among the road players in Libya. Last count: 9 pavers, 1 CR 2200, 5 milling machines and 29 rollers.

The TBW project started mainly using the traditional mill and pave technique. However RBA was very pleased with a 10 km-trial using the Cold In Place Recycling (CIPR) method that they asked HCMA to subsequently do another 58 km stretch using CIPR which has now been completed.

Again it was a hit!

The client then asked HCMA to introduce CIPR at another ongoing project. Thus the upgrading of 40km of the 90km dual carriageway Tripoli Gharian (TPG) road maintenance project will be carried out using the CIPR technique. HCMA provides technical assistance for this project. Its main contractor is Libyan Malaysian Company for Road and Construction (LMCRC). The latter is 51% owned by Libya’s Real Estate Investment Company (REICO) and 49% owned by HCM Ikhtisas. TPG is scheduled to finish in March 2011.  

HCMA General Manager, En Mohd Nasir Hassan said he believes that TBW Phase 2 project augurs well for HCM Engineering and the friendly relationship between Libya and Malaysia. Concurs Dr Akram, “ Libyans love Malaysia. It is a Muslim country which they have heard a lot. They like (former premier) (Tun) Dr Mahathir Mohamad. Many of them have also been to Malaysia as tourists and for medical treatments.”   

Working in a foreign land is not without challenges.

 Even so, En Nasir said HCMA workers have generally managed to overcome the test in Libya. He said, “Sandstorms, rain, occasional machine breakdown and language barrier are no obstacles when we approach them positively. Through mutual understanding, teamwork, ingenuity, discussions and negotiations with the parties involved amid sound relationship with the Libyans, we are proud to be associated with useful road projects for the benefits of both countries.”

Dr Akram also attributed the workers’ adaptability to the family-like working environment which has been inculcated in Libya. Said he, “ We have regular gatherings with the site people. They have access to top management.” Besides, the Malaysian workers love Libyan food and they are also prepared to learn Arabic on-the-job.

Capitalize on India’s Infrastructure Development?

With increasing priority given to infrastructure development in India, with 20,000km road earmarked to be completed in three years, it will not be a surprise if most of  infrastructure companies' focus will be shifted to India. India, which already has one of the largest networks of road in the world, hopefully will be another market for Protasco Bhd to penetrate in.

                                           (Taken from HCM Engineering website)

 A check on the website of HCM Engineering reveals that they indeed looking forward to participate in infrastructure development in India with large delegates from the company attended the India Infrastructure Forum in London on 2^nd February 2010. The ability to penetrate into India, hopefully will be another catalyst for Protasco Bhd although it might not happen so soon.

You can refer to my previous post below,

Protasco Bhd

Protasco Bhd - HCM Engineering & Kumpulan Ikram

Know How or Know Who

Investing in company which have the bulk of earnings contributed directly or indirectly by the Government normally being labelled as 'politically-linked' company by the investing communities. Long term concession contract, monopoly, favourable incentives are some of the features normally associated with those companies. The advantages of having investing in those company definitely would be having the most reliable customer or business that is fairly recession proof. The downside of investing in those companies obviously would be changes of the guidelines or changing of the government altogether.
Some companies would try to shake off those unfair labelling by diversifying to other businesses while some trying to proof their abilities through expanding to other countries.
Hence, as an investor, we should look into the existing businesses and the future plan of those companies to minimise the downside risk while enjoying those advantages.
Two companies posted in this blog, Kumpulan Fima and Protasco might be unfairly labelled by some investors with Kumpulan Fima through their manufacturing of securities documents and Protasco through their long term road maintenance concessions.
From my opinion, Kumpulan Fima have done very well to proof their ability by diversifying to palm oil plantation which contributing significantly to their revenue and bottomline.
Protasco, meanwhile, having good management at helm with many other well planned businesses certainly prove to certain extent .Their ability to penetrate into Middle East is definitely a big big plus!

Protasco - HCM Engineering & Kumpulan Ikram

Looking into Protasco business would not be complete without looking into Protasco's two main and wholly owned subsidiary. I manage to get some information from both subsidiary through their respective website.

HCM Engineering Sdn Bhd
HCM Engineering which incorporated in 1991, is the specialist in pavement construction and rehabilitation. Their ability to produce high quality and cost effective works that separate them from their competitors. With their constant research, they are able to develop new and more cost effective techniques. They even strive to improve their environmental performance by adopting recycling techniques to rehabilitate distressed roads and highway pavements. HCM presently registered with Construction Industry Development Board (CIDB) and Pusat Khidmat Kontraktor (PKK) with a Class A Bumiputra Contracting License.

Kumpulan Ikram Sdn Bhd
Kumpulan Ikram Sdn Bhd is in business involving education, training, geotechnical consultancy, site investigation, project management and infrastucture research&development. They are one of few organisation capable of having self-funded R&D which speaks volumes of their capability.

From the information of both subsidiary, we can see this a well managed and planned company. All their businesses complement well with each other. From churning out talents to constant research & development, it will not only benefit Protasco but the nation as well. Impressive!

Protasco Bhd

Core Business:
-Road Construction, Maintenance, Upgrading & Rehabilitation.
-Engineering Services & Consultancy
-Buildings & Specialised Construction
-Education & Training
-Trading of Construction Related Materials
-Overseas Investment & Trade

Based on information dated 1/3/2010
Current Price: RM0.995
Total EPS 2009: 14.33sen
Total Dividen 2009: 8sen
PE: 99.5/14.33 = 6.9
Dividen yield = 8%

I find this company attractive due to
-Undemanding PE at around 7
-Strong Balance sheet (refer to latest Q4 BS above)
-High dividend yield around 8 %
-Strong incuring income from 3 long term 15years concesion with government for road
maintenance (refer to AR2008)
-Expanding to Middle East (Libya & Syria)