At a time when the Covid-19 pandemic is testing financial resilience, Pestech International Bhd has remained largely unscathed.
The power infrastructure specialist, which has presence in more than 20 countries, is well-supported by stable recurring income from its three major projects in Cambodia — two of which were completed this year.
Pestech CEO and executive director Paul Lim Pay Chuan believes the timing could not have been better for the group to be collecting a monthly income of US$2.3 million to US$2.4 million from two build-transfer and one concession projects in Cambodia.
“Covid-19 is a new norm for us to handle, but the good thing is that most of the debt we are carrying right now has been turned into cash-generating assets,” he tells The Edge in an interview.
The 50-year-old Lim, who was appointed to the board in August 2011, says the stable income streams from Cambodia will allow Pestech to weather the current economic storm. “If you look at the COD [commercial operation date] of our two build-transfer projects, we could not have asked for better timing.”
Lim says Pestech received the COD for its 230kV/500kV Sihanoukville-Bek Chan (Phnom Penh) power transmission infrastructure project on March 1 — shortly before the Movement Control Order was imposed in Malaysia.
A month earlier, the group had received the COD for its 115kV Siem Reap-Oddor Meanchey transmission line project.
Together with the 230kV Kampong Cham-Kratie power transmission infrastructure project — a 25-year independent power transmitter concession which started in January 2018 — Pestech now has three major completed projects generating recurring cash flow for the group.
It is worth noting that the monthly recurring income from the projects will increase over time as it is based on fixed schedule payment.
“Imagine if we hadn’t completed the two build-transfer projects in Cambodia, we would have been stuck and unable to collect any income after investing heavily there. We consider ourselves very lucky as we managed to finish these projects right before the Covid-19 crisis worsened,” says Lim.
He is the nephew of Lim Ah Hock, the executive chairman and a major shareholder of Pestech. Collectively, they control about 55% of the group, which is mainly involved in power generation and electrical systems, transmission lines and power cables, infrastructure asset management, rail electrification and signalling, as well as power distribution and smart grids.
According to Lim, Pestech’s earnings are expected to be resilient for the foreseeable future as it is backed by a sizeable outstanding order book of RM1.5 billion as at Dec 31, 2019.
“We will be collecting US dollar income from Cambodia, the Philippines and Papua New Guinea (PNG). Hopefully, we can close two more projects in Cambodia,” he says.
Pestech’s net profit grew 36% year on year to RM78.97 million in the financial year ended June 30, 2019 (FY2019). This was despite a 2.8% y-o-y decline in revenue to RM811.47 million. The stronger earnings were mainly attributed to higher profit margins of its projects.