Engtex … July 2013

The water industry is in for a revival, with the key catalysts being the imminent award of Langat 2 water treatment plant and water reform in Selangor.

Engtex will be a beneficiary because of increasing pipe demand.

Engtex is Malaysia’s biggest pipes/valves/fittings (PVF) wholesaler, backed by its manufacturing arm (wire mesh, mild steel pipe (MS), ductile iron pipe (DI)) for the water/sewerage and construction sectors. It has also been involved in property development since 2008.

Upcoming MYR3.7b Langat 2 water treatment plant, where Engtex could secure the bulk of the required large-diameter MS pipe orders, being one of only two large-diameter MS pipe-makers in the country and its plant in Serendah is close to the Langat 2 site.

PM Najib’s letter to the Selangor government on 29th Jun 2013 implies renewed urgency to restructure the long overdue water supply industry in the state. Upon implementation of the new structure, we expect a strong resumption in pipe spending in Selangor, after having severely under-spent over the past five years. Given that DI pipe is the preferred pipe in Selangor, Engtex stands to benefit the most as it is one of only two DI pipemakers in Malaysia.

Engtex is a vertically integrated trading company in the water/sewerage sector, with operations in the wholesaling of pipes/valves/fittings (PVF) and manufacturing of wire mesh, mild steel pipes and ductile iron pipes.

Since 2008, the Selangor state government has imposed a freeze on Syabas’ (water distributor in Selangor) water tariff hike which has affected its capex programme, which includes the replacement of old pipes, until the state’s water supply industry restructuring is accepted and implemented.

The long overdue water reform in Selangor may be close to reaching an agreement, given that: (i) poor service quality (i.e. water supply interruptions, pipe bursts) in the state has affected the Selangor population; and (ii) Selangor is potentially in for a water crisis with an acutely low water reserve margin of 8%. PM Najib is also reported to have written to the state government on 29 June 2013, saying that he was “open and ready” to discuss the matter.

Upon the implementation of the water restructuring (water assets to be taken-over by federal-owned PAAB), industry observers see a strong resumption of pipe demand in Selangor. Being one of the only two DI pipe-makers in Malaysia, Engtex stands to benefit the most as the usage of DI pipes is preferred in Selangor.

Engtex is also looking to tender for pipe orders in Singapore which is expanding its water infrastructure for NEWater. The Singapore government aims to expand the NEWater capacity to meet 55% of the nation’s demand by 2060 (from 30% now).

Additionally, it has also embarked on property development since 2008 Going forward, property development will remain a continuing business for the group as Engtex will constantly replenish its landbank for fast-turnaround developments. Additionally, the property division also complements its wholesale and manufacturing arms as the required

Engtex is also building three small hotels in the highly-populated areas in Selangor. The three hotels are scheduled to commercialise by 2H15 and will be a new recurring income stream for the group

Engtex is founded by Dato’ Ng Hook (aged 58), who currently holds the positions of Non-Independent Executive Director and Group Managing Director in the company. In addition, Dato’ Ng has two younger brothers sitting on the Board of Directors, namely Ng Chooi Guan (aged 50, Non-Independent Executive Director and Managing Director) and Ng Yik Soon (aged 46, Non-Independent Executive Director). Collectively, the Ng family holds approximately 48% of equity interest in Engtex.