Ipmuda diversifying into healthcare and energy
04 Jan 2021
Company seeks new opportunities in turnaround bid
Ipmuda Bhd, which is principally involved in the trading of building materials, is diversifying into the healthcare and renewable energy (RE) segments to seek new opportunities and turn the group around.
Given the challenging operating environment and the group’s relatively fragile financial position, executive chairman Beroz Nikmal Mirdin said Ipmuda has designed a turnaround programme to emphasise “two distinct imperatives.”
“Firstly, we are focused on stabilising the financials and operations of the existing construction, building material and contracting business. Essentially, we are strengthening the foundation of the business to ensure that once the construction sector recovers, the group is ready to catch the recovery tailwind,” he told Starbiz in an e-mail.
Beroz said efforts include delayering the organisation to reduce the number of regional offices and cost to match with demand and financial capacity.
“We are near the tail-end of this exercise and are beginning to see some of the benefits. Additionally, we have also shifted priority to higher margin, niche segments to better align with our strengths. We are also currently restructuring and rescheduling existing facilities with our bankers and suppliers.
“For financial institutions the general direction is to convert existing unsettled trade facilities and overdrafts into term loans with a deferment of capital repayment.
“This will allow us to have better control of cash flow for day-to-day business operations and to enhance the financial position of the group.”
Secondly, Beroz said Ipmuda is looking to aggressively build “alternate engines” as part of the group’s diversification strategy to promote future growth and boost profitability.
“The RE industry in Malaysia, as measured by cumulative installed capacity, will need to grow by at least five times from its 2019 installed base of 1,483MW to 7,838MW by 2025 to meet the 20% RE target as set by the government.
“We have already taken some steps to begin this transition. For example we recently announced that our wholly-owned subsidiary, Ipmuda Rensol Sdn Bhd, executed an engineering, procurement, construction and commissioning contract with Coara Marang Sdn Bhd for the construction of a ground mounted photo-voltaic solar generation facility with an installed capacity of 100MW Solar Park in Marang, Terengganu.”
Beroz said Ipmuda is exploring the possibility of offering operations and maintenance services to other RE developers.
“We believe this strategic move will enable us to tap into a profitable segment of RE with a sustainable, long-term prospect.”
As for the diversification into healthcare, Beroz said the sector is a global mega-trend of a growing number of hospital admissions and outpatient attendees, driven primarily by an aging population and increasing incidences of chronic lifestyle diseases.
“In Malaysia, the rise in healthcare expenditure is also due to the increasing affordability of healthcare services in Malaysia with medical insurance becoming more wide-spread.
“Since healthcare and healthcare-related services are essential to the population well-being, the sector is less susceptible to economic cycles and its growth rates tend to exceed gross domestic product.”
Beroz said Ipmuda intends to develop, own and operate private healthcare services involving facilities, such as private hospitals, healthcare specialists and clinics, retirement and aged-care resorts, homes or villages, as well as healthcare-related tourism under the Malaysia My Second Home Programme.
Also, with new board members at the helm, Beroz is confident that Ipmuda has the right people to see through its diversification plan.
Recently, Ipmuda announced that it would be undertaking a private placement for third party investors and a restricted placement among its directors.
“With the proposed restricted issue, we aim to raise gross proceeds of up to Rm7.68mil. This will be channelled towards estimated expenses in relation to the diversification of new businesses as well as working capital,” said Beroz.
Ipmuda’s trading segment contributes over 90% to revenue. However, for the past four financial years, revenue for the trading segment has dropped significantly from Rm412.62mil to Rm80.98mil in its financial year ended June 30, 2020.
Beroz noted that the group had been incurring losses due to the industry wide glut and slow-down of the construction and property development sectors.
Operational inefficiencies, high operating costs, the erosion of pricing and profit margins due to increased competition from both local and overseas manufacturers and suppliers have also contributed to the group’s earnings decline over the years.
“We continue to undertake business efficiency exercises for our trading division,” said Beroz.
“We foresee that the trading business segment will continue to face various challenges in the current business environment, including longer credit period for customers to make payment, pricing competition and issues with the timely supply of products due to the impact of the Covid-19 pandemic on the product supply chain.”
Source: The Star