Minetech bullish about its diversification strategy
01 May 2021
From renewable energy to financial technology (fintech) and from blockchain to food security. Those are the big trends in the global economy today.
Not many Malaysian companies can lay claim to being leaders in these sectors let alone being involved in all of them.
But one loss-making Main Market-listed company has set its sights on all these sectors.
Minetech Resources Bhd, an aggregate mining firm, is looking to diversity into such areas.
The group has made known that it is looking to diversify its portfolio in oil and gas (O&G) and renewable energy sectors.
Moreover, two months ago, Minetech also revealed that it was diversifying into the fintech sector via the acquisition of a payment solutions specialist, Uniqa (M) Sdn Bhd.
And last month, the group registered itself as a solar photovoltaic (PV) investor with the Sustainable Energy Development Authority Malaysia, announcing its venture into the solar business.
But there are still more ventures the group is proposing to look into such as the food security and the telco industry, says its executive chairman Datuk Awang Daud Awang Putera. (pic below)
“We will share more news as soon as these are finalised in the near future, ” he tells StarBizWeek.
Notably, Minetech’s existing businesses are in the production of quarry, asphalt premix and bituminous products as well as in civil engineering works.
The group has made it clear how it intends to fund the proposed diversifications.
Awang says all diversifications including food security and the telco business would be funded through both proposed private placement and rights issue of irredeemable convertible preference shares, which would raise RM72.9mil to RM98mil.
Although Minetech appears to be following the mantra to not have all its eggs in one basket, market participants may price in a discount to the value of the group that has several diversified portfolios.
This would mean that as Minetech stretches its hands in diverse business portfolios, its earnings would be discounted at a lower value because investors prefer to undertake investments in companies that are focused on not more than two businesses, says a financial adviser.
“Nevertheless, some conglomerates do not mind the discount, ” says the adviser.
In the current market environment, the consultant notes that it is more practical for companies to stay focused on areas they can excel and venture into businesses that complement each other.
However, debt restructuring specialist Davin Fernandez, who is the director of Sage 3 Capital Sdn Bhd, says there is no harm for companies to venture into other businesses as long as the valuation of the acquisition is “rightly priced”.
But the big question is does Minetech have too much on its plate?
To this, Awang says the group will tread carefully and evaluate each opportunity thoroughly before making any decision.
“Not all opportunities that come our way are economically viable.
“There will be the usual due diligence and evaluation process that we have to carry out before we commit ourselves into anything new, ” he explains.
However, Awang says the group has to be attentive to any available possibilities, as this year is important for it to move towards a more sustainable business framework.
With its recent venture in acquiring Uniqa, Minetech has plans to provide a stack of fintech solutions which include remittance products.
Given that the remittance industry has grown significantly in the last decade, Awang says the group would be applying for a Class B remittance licence to explore e-wallet payment.
“This will allow us to also focus on selling remittance products to unbanked consumers such as workers in plantation and offshore, ” he adds.
Besides remittance products, Awang says Minetech’s focus in the near term would be peer-to-peer (P2P) lending as well.
Next year, the group plans to launch its artificial intelligence solutions and blockchain technology.
On the blockchain technology front, Awang discloses that its team is exploring to enhance its current remittance technology with Ripple.
By the first quarter of next year, he says the group will be expanding its remittance services via blockchain networks.
“Our current focus for Uniqa this year is to expand our remittance coverage and help our existing clients to introduce additional remittance products, multiple modes of payments, additional networks and technology expansion.
“We are in the midst of establishing the necessary foundations to create a full spectrum of fintech solutions before we add in more products and launch our SuperApps!, ” he says.
In two years, the group’s strategy is to drive additional revenues from remittance, e-Wallet and micro Lending or P2P lending business, Awang says.
In the third quarter ended March 31, the group’s net profit fell 80% to RM232,000 from RM1.18mil a year ago.
Citing Minetech’s focus in the provision of engineering, procurement, construction and commissioning, Awang reveals that the group is in talks with several industry players in the O&G sector.
“I am not at liberty to disclose any of these at the moment as discussions are ongoing, ” he says.
Overall, Awang is confident that the group would be able to record growth in “leaps and bounds” in the coming years through diversifying its portfolio in the O&G and fintech sectors.
“We expect moderate growth in revenue from new ventures this year, as this is the first year that we are focusing our attention on new business sectors.
“For the subsequent years, we expect stronger growth as we build and expand our capabilities and portfolio further, ” he says.
Source: The Star