PETALING JAYA: Lim Seong Hai Capital Bhd (LSH Capital) has proposed to diversify into construction and provision of construction and business-related services and solutions.
“The proposed diversification is sought as the board anticipates construction-related businesses will contribute 25% or more of the net profits of LSH Capital Group, which will be one of the major contributors to LSH Capital group in the future,” it said in a filing with Bursa Malaysia today.
The proposed diversification will allow the group to be involved in the upstream supply chain of the construction industry, which is in line with the BEST Framework adopted by LSH Capital.
The company said it has taken into consideration the expected revenue and profit contribution from its subsidiary LSH BEST Builders Sdn Bhd (LSHBB). As at June 30, 2022, LSH Capital, via LSHBB, has a secured external construction order book amounting to RM969.4 million in aggregate with an outstanding external construction order book of RM853.1 million.
In addition, LSHBB is involved in the provision of construction and business-related services and solutions via the BEST Framework collaboration for the construction projects secured by LSHBB’s clients and property development projects undertaken by LSHBB’s clients with a total project value of RM2.7 billion as at June 30, 2022.
The proposed diversification and the potential contribution from construction related businesses will strengthen the future earnings base and enhance the future cash flow of the enlarged LSH Capital arising from the construction order book.
On top of that, the construction-related businesses will support and ensure continuous orders for existing construction products businesses under Lim Seong Hai Lighting Sdn Bhd and Knight Auto Sdn Bhd as there will be requirements for building materials, lighting products, mechanical electrical products and services and rental for machineries. This will also provide operating and logistical efficiencies and mitigate the collection risk as compared to supplying to third parties.
The proposed diversification is expected to contribute positively to the earnings of LSH Capital for the financial year ending Sept 30, 2022 and the future financial years, it said.
Nonetheless, LSH Capital said it will continue its existing business of distributing and retailing building materials, lighting products and related mechanical and electrical products and services, whole-sale/retail of hardware and tools, and rental of machinery.
