EWEIN was incorporated as an investment holding company on April 2007 and it principally engaged in the business of
- precision sheet metal fabrication, specializing in sheet metal enclosure
- designing and fabrication of precision moulds, tools and dies
- precision injection moulding and product finishing
In December 2013, EWEIN entered into joint venture agreement with Consortium Zenith BUCG Sdn Bhd to form Ewein Zenith Sdn Bhd. By this JV, EWEIN officially diversified into property development sector and slowly shift the Group’s main revenue contribution from precision mould business to property development.
The below is properties which owned and managed by Ewein Zenith.
Financial Highlights
EWEIN financial performances for the past 3 years were considered average. Having said so, it did not made losses in any single quarter before from FY12 to FY15.
In FY15Q3, EWEIN revenue had shown a significant improvement, from previous quarter MYR10m to MYR29m! Its net profit had also increased from MYR0.5m to MYR6.4m!
It was contributed from its maiden property development activity which had commenced during FY15Q3. FYI, it was also the first time contribution from property development sector.
The profit contributed from property development in FY15Q3 was MYR10.26m while its manufacturing segment only contributed MYR0.57m. Overall, profit which attributable to shareholders of EWEIN was approximately MYR6m, as MYR4m out of MYR10m was distributed to its non-controlling interest partner, Consortium Zenith BUCG Sdn Bhd (will discuss further below).
Regarding its manufacturing of precision metal segment, the quarterly operating profit from this segment was averagely MYR0.5m since FY13. The below is the operating profit margin.
EWEIN operating profit margin for its manufacturing segment had dropped from quarter to quarter and it was only 5% in FY15Q3! Since this segment is not profitable and EWEIN is not able to expand its manufacturing business, it decided to diversify into property development segment, to reduce its dependence on manufacturing business.
FYI, the operating profit margin for its property development segment was up to 60% in FY15Q3!
Financial Strength
EWEIN was never been in a cash positive position since FY12. Since it diversified into property development in FY15, it had invested a lot of money in the “City of Wellness” project. EWEIN borrowing currently was up to MYR139m with cash on hand of MYR49m.
Its debt to equity ratio had also increased from 49.48% in FY14 to 184.37% in FY15!
Having said so, in the latest quarter, EWEIN had a property development costs which is up to MYR157.47m! This development costs can be converted into revenue in the future.
Its NCAV had been increased significantly in FY14 and FY15, with current MYR0.17 per share. In other words, EWEIN is able to meet its short term obligation.
Diversify to Property Development
EWEIN, a precision sheet metal fabrication company, expects its property development business to be the main driver of the group’s growth in the near future.
According to EWEIN group managing director Datuk Ewe Swee Kheng, the property business will become EWEIN core business in a year’s time, and it will contribute over 80% of our revenue and profit after tax.
In Oct 2013, Ewein Zenith Sdn Bhd (“EZ”), a joint venture company had been formed between Ewein Land 60% and Consortium Zenith BUCG (“CZ”) 40%. The principal activities of Ewein Zenith are property development, construction and property investment.
CZ is a special purpose vehicle formed among Zenith Construction (99.94%), Beijing Urban Construction Group (0.02%), Juteras (0.02%), and Sri Tinggit (0.02%).
Previously, CZ had signed an agreement with the State Government of Penang. The State Government of Penang shall alienate a piece of land to CZ as partial payment for the works for the major roads project and the third link (tunnel) project in Penang.
FYI, the land mentioned above is located at Bandar Tanjong Pinang, Negeri Pulau Pinang, with approximately 3.67 acres.
In order for the land to be alienated to EZ, in Feb 2014, EZ and CZ had signed a supplementary agreement where EZ will pay MYR133m to CZ as its contribution to the joint venture and the land.
On March 2015, EZ had received planning permission from the Penang Island City Council to go ahead and develop a mixed project on the land.
In Apr 2015, the building plans for the proposed development on the land had been approved by Penang Island City Council. The gross development value (“GDV”) of this proposed development is approximately MYR800m.
In July 2015, EZ had obtained the Advertising Permit and Developer License from Jabatan Perumahan Negara, Kementerian Perumahan dan Kerajaan Tempatan as well as the approval for commencement of work for the development of the City of Dreams project.
With this, EZ commenced development work of the City of Dreams project.
Wellness City of Dreams
EZ was awarded and chosen to champion Entry Point Project 10 (“EPP 10”) under the Economic Transformation Programme by the Domestic Trade, Cooperatives and Consumerism Ministry. EPP 10 is for the development of a wellness resort city, which will be located on the City of Dreams development.
Under the wellness resorts EPP, the Government is targeting gross national income of MYR2.67b by year 2020.
The proposed development of the parcel of land was now better known as the "City of Dreams" project.
Memorandum of Understanding with Consortium Zenith
On Aug 2015, EZ had signed a memorandum of understanding (“MOU”) with CZ to develop a wellness hub to be known as "Wellness City of Dreams" in Penang, which could have a potential GDV of MYR15b.
The MOU was inked for the proposed development of the three parcels of freehold land, measuring 50 acres.
The land is part of the 110 acres of reclaimed land given to CZ by the Penang Government in return for the construction of the MYR6.3bil Penang undersea tunnel and three major roads.
The wellness resort, estimated to be fully operational before December 2020, will encompass a wellness mall, wellness business and specialist centres, wellness resort and a hotel – which also provides treatment services such as anti-aging, aesthetics, and comprehensive regenerative treatments.
The 110 acres of land also includes the City of Dreams project with a GDV of MYR800m to build 572 condominium units.
EWEIN’s maiden project in Penang, City of Dreams, was expected to generate profit before tax and minority interest of MYR50m/year from year 2016 to 2020.
The property business is expected to contribute based on EWEIN’s 60% share in the MYR800m City of Dreams property joint venture. It will give EWEIN a profit before tax of MYR30m.
Incorporation of Ewein Zenith II – City of Dreams II
On Jun 2015, the Board of Directors of Ewein Land had approved to incorporate a new 60% owned subsidiary in Malaysia, named as Ewein Zenith II Sdn. Bhd (“EZII”), with 40% equity interested owned by CZ.
On Dec 2015, EZII had proposed to acquire all that piece of freehold land situated in Section 1, Bandar Tanjong Pinang, Pulau Pinang measuring approximately 4.42 acres for a total consideration of MYR162m.
EWEIN is proposing to develop three blocks of luxury serviced apartments on the 4.42 acres piece of freehold land, which will have a GDV of MYR1 billion. To be called City of Dreams II, the serviced apartments will comprise 891 units
Conclusion
EWEIN had shift its main revenue contribution to property development. In the coming 5-6 years, “City of Dreams” will be its main source of income.
This project is supported by Penang Government and it is also a part of Entry Point Project 10 (“EPP 10”) under the Economic Transformation Programme. So, I strongly believe this project can be done.
Currently, it is on track to achieve full-year pre-tax profit of MYR20m from its maiden property project, City of Dreams. If we refer back to EWEIN FY15Q3 net profit of MYR6m, MYR20m net profit in a full year is definitely achievable.
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EWEIN (7249) - (RICHE HO) Ewein Berhad - Transforming into Property Play
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