KUALA LUMPUR: Meta Bright Group Bhd (MBG) expects to see positive earnings growth from its mining leasing business as the company plans to expand this segment further.
Executive director Derek Phang Kiew Lim said the company plans to secure more leasing contracts and aims for this segment to represent about 25 per cent of MBG’s overall net profit within the next three years.
“This strategic expansion is expected to bolster our earnings consistently and reduce revenue volatility, aligning with our long-term financial goals,” Phang told The Exchange Asia.
Currently, MBG is managing three leasing contracts, one in Malaysia and two in Australia, and plans to continue expanding in this space, particularly the equipment leasing market in Australia, due to its established presence and the promising market outlook.
“We are open to various industries as long as there is a demand for heavy machinery. We assess each potential lease based on the clients’ financial viability and specific machinery requirements.
“The prospects for further expansion are substantial, given the robust growth of the mining industries in both countries,” Phang said.
Recently, MBG made its foray into the international leasing business, particularly with the equipment leasing agreement with Mt Cuthbert Resources Pty Ltd, a copper mining company in Australia.
Mt Cuthbert Resources is wholly owned by Dragon Field International Ltd.
MBG executive director and major shareholder Datuk Kelvin Lee Wai Mun holds an indirect aggregate interest of approximately 40.2 per cent in Mt Cuthbert Resources through Dragon Field International.
Phang said Australia’s mining industry, which includes a wide range of minerals from iron ore to copper, has seen a significant increase in exploration income, expected to reach AUD$5.7 billion by 2025.
Similarly, Malaysia’s mining output is also on an upward trajectory and is forecasted to grow further, reaching RM12.8 billion by 2025.
He said this growth is driven by increasing local and international demand for minerals, critical raw materials for the manufacturing and construction industries.
“Our focus will remain on industries that require heavy and light machinery, typical in the mining, construction, and manufacturing sectors.
“The equipment leasing market itself is witnessing strong growth, with the industry in Australia expected to expand to US$1.9 billion and in Malaysia to RM3.1 billion by 2025.
“This growth presents a strategic opportunity for MBG to leverage its capabilities in these burgeoning markets.
“The potential for expansion is aligned with increasing global demands and the strategic need for companies in these sectors to manage capital expenditure effectively by opting for operational leasing solutions,” Phang elaborated.
He said the monthly recurring revenue of AUD$259,000 from its leasing agreement with Mt Cuthbert Resources translates to approximately RM795,844 per month to MBG’s overall revenue stream.
With a net profit margin of at least 26 per cent, Phang said this figure might not seem significant compared to the company’s net profit of RM3 million in the second half of FY24.
“Still, it’s essential to recognise the stability and low risk associated with this income. The recurring nature of this revenue is precious, providing a steady cash flow that enhances our financial strength,” he said.
When asked about other aspects of MBG’s growth and stability that will be interesting to watch in 2024, Phang said one key focus would be the company’s building materials division, which would leverage the acquisition of Expogaya Sdn Bhd to capitalise on infrastructure and building development opportunities in East Malaysia, particularly Sabah and Sarawak.
To recap, in February 2024, MBG acquired a 70 percent stake in Expogaya, a leader in ready-mix concrete manufacturing.
This strategic move is expected to drive recurring income as the acquisition comes with an aggregate profit guarantee of RM30 million over five years.
“The acquisition of Expogaya opens new revenue streams in the building materials market, especially given the promising infrastructure and construction developments in East Malaysia.
“This as the country is witnessing significant investments in critical infrastructure projects such as the Pan Borneo Highway, which aims to enhance connectivity and spur economic growth across Sabah and Sarawak,” Phang said.
He said with the construction industry in Malaysia projected to thrive, reaching a market size of US$38.55 billion in 2024 and expected to expand at a compound annual growth rate (CAGR) of 8.55 per cent to reach US$58.10 billion by 2029, MBG’s position through Expogaya is strategically set to capitalise on the increased demand for building materials.
Additionally, Phang said MBG is set to enhance its solar energy sector, mainly targeting the commercial and industrial (C&I) and government buildings segments.
He said this niche market holds significant potential for growth, and the company plans to engage in more joint ventures and collaborations to expand its footprint in this area.
“We are also in the midst of evaluating the recently announced large-scale solar (LSS5) packages.
“Our leasing and financing division is also expected to grow, with plans to finalise a third significant leasing agreement that mirrors the successful structure of our previous contracts.
“This involves MBG financing equipment purchases, which are then leased back to operational owners,” Phang said.
Moreover, given MBG’s recurring solid cash flow, the company is well-positioned to pursue further mergers and acquisitions throughout the years.
“This strategic capability allows us to continuously strengthen our market position and enhance shareholder value through targeted strategic expansions,” he said.
