KUMPULAN PERANGSANG SELANGOR BERHAD
INVESTOR BRIEFING
1ST QUARTER 2019 RESULTS
“Stronger Contribution by Core Businesses”
31 May 2019
Table of
ContentsSECTION 1 : The KPS That Was 4 - 6
SECTION 2 : Business Transformation Plan (“BTP”) 8 - 11
SECTION 3 : Sector Reclassification 13
SECTION 4 : 1Q19 Financial Results
a. Sectoral Performance Review b. BTP Earnings Translationc. Group Financial Results
17 – 2628
30 -32
SECTION 6 : Future Plans & Prospect 34 - 38
SECTION 1
THE KPS THAT WASI
4
Core Interest in Challenging SectorsResulting in Unfavourable Market Perception
Non Controlling Stake
Unattractive Business Model
Products / Services Lacking USP
DelicateFinancials
Investments in 2015
Infrastructure Telco Oil & GasUtilities Hospitality Trading
(30.0%)
(20.0%)
(90.8%)
(30.0%)
(100%)
PHP (100%)
Ceres Telecom(34.3%)
(40.0%) (36.0%)
Perception
0.8
1
1.2
1.4
1.6
1.8
2
Unsustainable Growth Due to Absence of Core Catalysts Declining Share Price & Dependability of Dividend Distribution on Sale of Assets
5
2014 2015 2016
Shar
e P
rice
(RM
)
Negotiations in relation to water assets continuing from 2013 gave rise to speculative share price performance
Oct 2015: Announcement -proposed disposal of ABASS
Revenue (RM mil) PAT (RM mil)
117.6
314.0
58.9
286.0
101.9
144.5
Dividend per Share (sen)
4.00 2.00 4.25
Sustained Business Challenges Called for a Paradigm Shift in How We Do Business
6
Business Transformation
Plan
(“BTP”)
Continued Decline in Share Price
Imminent Divestment of
SPLASH
UnfavourableSentiment
Amongst Investors
“Creating Sustainable Value to Shareholders”
SECTION 2
BUSINESS TRANSFORMATION PLAN (“BTP”)I
A More Robust Strategy under BTPBefore & After Business Transformation Plan 2016
8
BEFORE AFTER
Sector Agnostic
Over-exposure to single sector
Generalist approach to investment
Selangor-centric business
Investee companies unable to pay dividends
Unsustainable Free Cash Flow
‘Heavy’ cost structure
Sector-specific
Balanced exposure over core sectors
Focused investment parameters
Boundaryless investment portfolio
Pre-investment Value Creation Plan
Balanced investment emphasis : dividends & growth returns
Efficient management of cost
Ensuring Sustainable Growth & Enhancing Shareholders’ ValueFour Pillars Crafted to Support BTP Objectives
9
Acquisition of Strategic Assets
▪ Majority stake▪ Mature / Market Leader▪ Financially Stable▪ Ability to Expand to be Regional or
Global Player
Creating Value in Subsidiary Companies
▪ Setting Value Creation Plans for pre and post acquisition ▪ Active Participation via
▪ EXCO and Board
Human Resource Development
▪ HR Process Improvement▪ Inculcating High Performance Culture
Institutionalising the Subsidiaries
▪ Focus on improving efficiency &optimising cost
▪ Reviewing processes of departments & adopting best practices
INVESTMENT
CRITERIA
AcceptedTakeover Offer of
SPLASHfrom Air Selangor
10
BTP in ActionAcquisitions and Corporate Exercises Since
Acquired 51% stake in Smartpipe
Acquired 60% stake in Kaiserkorp
Emerged as major
shareholder for Aqua-Flo
(51%)
Acquired 71.4% stake in Century Bond
Emerged as major shareholder for KPS-HCM (51%),
Smartpipe (60%) & Century Bond (98.9%)
Formed KKMW to manufacture King Koil Mattress for
US market
Acquired 100% stake
in CPI
Disposed:
Brisdale Hotel, Cengren Global
&Ceres Telecom
Disposed:
PTGC,ABASS
2016
2017
2018
Proposed Acquisition of 100% stake in
Toyoplas
2019
60%
11
Our Business TodayControlling Stake in Market Leaders in High Growth Industries
11
Manufacturing Trading Infrastructure AssociatesLicensing
KKMW
KKLC
60%
100%98.9%
60%
100%
51% 51% 40% 20%
SECTOR RECLASSIFICATIONI
SECTION 4
13
Bursa Sector ReclassificationProviding Accurate Business Benchmarking & Valuation
UTILITIES
INDUSTRIAL PRODUCTS & SERVICES*TO
*Effective 8th April 2019
FROMWith departure of SPLASH,
KPS has no direct exposure
in the water sector
To reflect KPS’ existing investment focus, business appeal
and future business direction
SECTION 5
1Q19 FINANCIAL RESULTSI
SECTORAL PERFORMANCE REVIEWI
ManufacturingI
Century Bond BhdRevenue Driven Mainly by Carton Division
17
▪ 80% utilisation
✓ Paper Bags (3 - Medan, Senai, Ipoh)
✓ Carton Box (2 – Senai, Nilai)
▪ 50% utilisation
✓ Plastics (1 - Senai)
▪ Steady revenue growth overall, driven by highercontribution from carton division
1Q19 HIGHLIGHTS
VALUE CREATION PLAN
Optimise product mix for higher-margin shrink plastic
Strengthen MY non-cement bags market: enteredadjacent industries – minerals & dry-mix segments
Focus more on offset carton and pulp mouldedproducts
97.4 89.5 90.8
21.8 21.1
32.6 45.262.7
12.3 17.1
12.4 14.1.0
13.4
3.4 3.6
12.519.3
19.4.0
5.0 4.4
6.76.0
3.6
1.6
FY2016 FY2017 FY2018 1Q2018 1Q2019
Paper Carton Consumer Plastic MLM
AS AT 31 MAR 2019 (RM’M)
FINANCIAL PERFORMANCE
174.1
189.9
46.2
Rev
enu
e (R
M m
il)
44.0
161.6
CPI (Penang) Sdn BhdHigher than Expected Sales, Maintained High Margins
18
▪ 80% utilisation
✓ Location : Bayan Lepas, Penang
▪ Steady revenue contribution driven by higher-than-expected ETP’s tooling and EMS sales. ETPcontributed 86% to revenue while EMS 14%
▪ Margins generally maintained high
1Q19 HIGHLIGHTS
VALUE CREATION PLAN
ETP: Focus on higher margins customers and newmarket to diversify customer base
Expansion of operations capacity : acquisition of newland, machineries for ETP & EMS expansion
Venture into new plastic segments : cautiousexploration into high performance engineeringthermoplastic (HPTP) via aerospace industry
48.6 52.6 43.318
36.0 3630.2
9.7
32.639.0
39
12.7
18.3
17.8
14.8
5.2
FY2016 FY2017 FY2018 1Q2019
Automotive Healthcare Communications Others
FINANCIAL PERFORMANCE
AS AT 31 MAR 2019 (RM’M)
151.8
45.6
127.3**
**Note : Figure is based on 9-month contribution
Rev
en
ue
(R
M m
il)
135.4
King Koil Manufacturing West Lower Overall Sales on 16% Capacity Utilisation
19
▪ 16% utilisation
✓ Location : Phoenix, Arizona
▪ Manufactured products contributed to 62% ofsales, which included new design showcased atWinter Market in January. The remaining 38% bydirect ship
▪ However, manufactured margin was lower due tolower overall sales and higher promotional lines
AS AT 31 MAR 2019 (USD’M)
1Q19 HIGHLIGHTS FINANCIAL PERFORMANCE
VALUE CREATION PLAN
Exports to China, Greece & Vietnam for made-in-the-US demand
Sales growth of premium lines
Bed in a box – for organic growth to cater for onlinesales
10.0
3.4
FY2018 1Q2019
Rev
enu
e (U
SD m
il)
TradingI
Aqua-Flo Sdn BhdLower Chemicals Sales Due to Dry Weather & WTP Commissioning Delay
21
▪ In addition to RM162 million by Air Selangor,secured 7 new projects from SADA, PBA, SAINS &Laku Sarawak worth ~RM16 million
▪ Sales of chemicals shortfall due to:
✓ Dry weather in Jan – March 2019 affectingdemand of chemicals
✓ Semenyih 2 not fully operational
✓ Langat 2 and Labohan Dagang expected tooperate only in 2Q19
AS AT 31 MAR 2019 (RM’M)
1Q19 HIGHLIGHTS
VALUE CREATION PLAN
FINANCIAL PERFORMANCE
78.895.3 104.6
25 25.0
2.7
2.91.7
0.50.6
2.4
3.14.8
0.9 1.0
FY2016 FY2017 FY2018 1Q2018 1Q2019
Chemicals Equipment Project & Misc Sales
83.9
101.3111.1
25.9
Rev
enu
e (R
M m
il)
26.3
Continue bidding for tender from water companies :Pending RM~40 million
Expansion into new sectors: industrial watertreatment & supply of water meters
LicensingI
King Koil Licensing Company IncHigher Royalty Fees from International Markets
23
▪ International royalties were higher due toadditional FY2018 fees from China and Indonesiawhich was reported and recognised this quarter
▪ International market made up for 88% of totalroyalties of USD2.6 million
AS AT 31 MAR 2019 (USD’M)
Q1 2019 HIGHLIGHTS
VALUE CREATION PLAN
FINANCIAL PERFORMANCE
2.5 1.2 1.3
0.3
4.6
5.2 5.7
2.3
0.7 1.6 0.4
0
1.2 0.4 0.1
-
FY2016 FY2017 FY2018 1Q2019
Royalty-US Royalty-Int Corporate Sales Other
2.8
7.5
9.0 8.4
Rev
enu
e (U
SD m
il)US nationwide distribution: solidify strategicrelationship with Blue Bell to form a unified King Koilfront for coast-to-coast coverage
International expansion & management : structuredlicensing process, stronger engagement & support
InfrastructureI
25
▪ Lower revenue due to delayed M&E and elevatedtank works in Pulau Indah Phase 3C Project
▪ Remaining orderbook from Central Spectrum ~RM50 million.
▪ New orderbook from Central Spectrum and LATARworth ~RM1 million
AS AT 31 MAR 2019 (RM’M)
1Q19 HIGHLIGHTS
VALUE CREATION PLAN
FINANCIAL PERFORMANCE
KPS-HCM Sdn BhdLower Revenue due to Delayed Works
Actively tendering for new projects worth ~RM150 million
Going forward, to improve bidding competitiveness by securing SPKK, OSH and EMS certifications 0
36.7
72.2
15.011.6
FY2016 FY2017 FY2018 1Q2018 1Q2019
Revenue
Rev
enu
e (
RM
mil) Dormant
26
▪ Orderbook : RM20.0 million. To replace existing16.3 km pipework in Hulu Langat and KualaLumpur, ending October 2019
▪ Lower revenue as Smartpipe is yet to secure newprojects and delay in current projects.
▪ Long-term prospect: Well positioned to capitalisefrom NRW projects
AS AT 31 MAR 2019 (RM’M)
1Q19 HIGHLIGHTS
VALUE CREATION PLAN
FINANCIAL PERFORMANCE
Smartpipe Technology Sdn BhdStart-up investment in Compact Pipe Providing NRW-reduction solutions
Positioning as integrated new tech/ conventional player : broad focus as NRW solutions provider & pipe rehabilitation contractor
Revenue generation via engagement with key players : continuous active engagement with state water players; pilot projects to prove technology & expertise.
4.2
20.2
5.4
2.6
FY2017 FY2018 1Q2018 1Q2019
Revenue
Rev
enu
e (R
M m
il)
BTP Earnings TranslationI
28
Enlarged Earnings BaseCore Business Strengthening Dynamics
-2
4KPS-HCM,RM11.6m
6
8
KKLC,RM11.2m
0
1Q19 PBT (RM mil)CPI,RM45.6m
CBB,RM46.2m
AquaFlo,RM25.9m
Smartpipe, RM2.6m
10
2
KKMW,RM13.8m
1Q19 Revenue (RM mil)
GROUP FINANCIAL RESULTSI
30
Continued with Growth TrajectoryStronger Overall Financial Performance
Healthy GrowthRevenue01
Concentration in Manufacturing SectorStreamlining Focus02
Strong TurnaroundOperating Profits03
Moving On Without SPLASHNew Earnings Dynamics04
REVENUE BREAKDOWN
31
Revenue GrowthStronger Manufacturing Contribution by CBB, CPI and KKMW
Manufacturing, 105.667%
Trading, 25.916%
Licensing, 11.27%
Infrastructure , 11.88%
Investment Properties2.9, 2%
Q1 2019Revenue
RM157.5 m
SECTOR Q1 2019 Q1 2018
Manufacturing 105.6 44.0
Trading 25.9 26.3
Licensing 11.2 7.8
Infrastructure 11.8 14.9
Inv. Properties 2.9 0.6
Inv. Holding 0.0 2.2
TOTAL 157.5 95.8
32
KEY HIGHLIGHTSStronger Contribution from Core Businesses
Note : Q1 2018 normalised results is by excluding SPLASH Holdings results
REVENUE
157.5
95.8
Revenue
+ 64%
Group revenue recorded higher due to:
▪ Strong manufacturing contribution of 67% to total group revenue
▪ New revenue generated from CPI and KKMW
▪ Higher international royalties for licensing business
22.9 22.6
2.5
EBITDA
EBITDA + 1%
Group EBITDA recorded higher due to:
▪ Higher Revenue & Cost of Sales due to new contributions from CPI & KKMW as compared to nil in Q1 2018
7.2
15.5
-4.6PBT
PBT
Group PBT recorded lower due to:
▪ Higher finance cost of +145% from previous year
▪ Higher depreciation charges at CPI
▪ Lower share of profits from associates -NGC and absence of SPLASH
- 54%
2.5
14.2
-5.9PAT
PAT
Tax Rate = 24%
- 82%
1Q 2019 1Q 2018 1Q 2018 (N)
SECTION 6
FUTURE PLANS & PROSPECTI
34
Organic Business Catalysts Manufacturing to Lead Growth & Value Creation
Optimising product mix and margins with offset printing and shrink plastic
Expansion plan is underway to cater for higher demand from ETP
and Electronics
The planned increase in mattress retailers expected to boost sales for KKMW
KKLC’s international royalties to continue to be supported by top international licensees
35
New Growth Catalyst via M&AProposed Acquisition of Toyoplas Manufacturing (M) Sdn Bhd
Can integrate with our core assets for focus and synergy
Has potential to grow to be market leaders
Has strong dividend paying capability and can provide immediate earnings traction
Target Completion:
3Q19
Why Malaysian-Based
Manufacturing?*
• Higher Sector Contribution to
GDP Relative to Regional Peers.
Historically ~ 22%
• Ranked 8th in Asia for
Innovation & Technology
• To benefit Further from
Industry4.0 due to Innovation
• Availability of Natural
Resources, Wider Sectoral
Potentials, Complete Ecosystem
• Conducive Infrastructure,
Labour, FDIs, FTAs & Broad
Trading Partners
*sources: The World Bank, AT Kearney, Cornell University
Recent Proposed Acquisition – Toyoplas Manufacturing (M) Sdn BhdBolt-on acquisition, creating a major player in the plastic injection moulding industry
36
▪ Toyoplas is involved in the plastic injection moulding industrywith an integrated capability from mould fabrication, precisioninjection moulding and assembly
▪ Eight locations across China, Malaysia & Indonesia
▪ The revenue mix is diversified based on geographical andindustrial exposure
▪ Toyoplas’ customer portfolio is backed by strong customer baseof market leaders and multinationals involved in the consumerappliances, communications & multimedia and automotivesectors
OVERVIEW
Valuation RM311.25 mil
Equity Stake 100%
Funding 53% debt, 47% equity
Signing Date 17 May 2019
COST OF INVESTMENT
FINANCIAL PERFORMANCE (USD’ mil)
Revenue by geography Revenue by industry
2019 Capex Guidance Mainly for CBB, CPI & KKMW for Capacity and Business Expansion
37
Company RM million Utilisation
Perangsang Selangor 50 - 60 Plaza Perangsang Development Phase 2
CBB 6 - 8 Machine Upgrade for Improved Capacity
CPI 50 - 60 Land Acquisition & EMS Expansion
KKMW ~1 New Machineries
TOTAL* 100 - 130
*2018 ~RM40 million, most of which due from King Koil, CBB and CPI
38
Strategies for Continued SuccessGrowth from New Earnings Base
2019
Value Creation & New Investments Opportunities
LOWER EARNINGS BASE
ONGOING BTP Earnings Base to Increase in Line with BTP
Departure of SPLASH Resulted in Earnings Gap
TARGETED RESULTS Market Cap Expected to Reflect Increased Earnings Base
ONGOING BTP
2019
2021
THANK YOU
40
Disclaimer on Forward Looking Statement
Kumpulan Perangsang Selangor Berhad (“Perangsang Selangor” or “the Group”) makes no representation or warranty, whetherexpressed or implied, as to the accuracy or completeness of the facts highlighted in this presentation, disclaiming responsibilityfrom any liability arising from the reliance on its contents.
This presentation and related discussions today may contain “forward-looking statements”. Forward-looking statements involveinherent risks and uncertainties and other factors that are in many cases beyond our control. Although Perangsang Selangorbelieves that the expectations of its Management as reflected by such forward-looking statements are reasonable based oncurrent information, no assurance can be given that such expectations will prove to have been correct. Should one or more of therisks and uncertainties materialise, actual results may vary materially from those anticipated or projected.
Accordingly, readers are cautioned not to place undue reliance on such forward-looking statements. In any event, thesestatements speak only as of their dates and we undertake no obligation to update or revise any of them, whether as a result ofnew information, future events or otherwise.
This presentation and its contents are strictly confidential and must not be copied, reproduced, distributed, summarised,disclosed, referred or passed in any form to others at any time without the prior consent of Kumpulan Perangsang SelangorBerhad.