ENRA Group Berhad Annual Report 2018

23 A N N U A L R E P O R T 2 0 1 8 ENRA Kimia commenced operations in September 2015. Its primary business is the supply of O&G specialty chemicals, catalysts and other related services to several downstream O&G operators in Malaysia. ENRA Kimia has since grown to be an integral part of the Group and its achievement so far has been exceptional. We are currently evaluating opportunities to upgrade and expand ENRA Kimia’s facilities to support its growing business and ensure security of business. The Group is expected to complete the acquisition of ICE, a specialty chemicals trading company based in Victoria, Australia in July 2018. ICE operates in the same industry that ENRA Kimia does and is therefore a natural expansion to ENRA Kimia’s existing business. We expect ICE to contribute positively to earnings for FYE 31 March 2019 and onwards. Our 60%-owned subsidiary, ENRA SPM, had clinched an approximate USD48 million contract from PETRONAS’ subsidiary, PCML for the provision of condensate storing, offloading facilities and services in Myanmar. We had won the contract via an open tender process, which was for the lease of a storage tanker to PCML for a primary period of four years. In April 2018, we successfully installed the storage tanker and SPM. We expect the project to contribute positively to our earnings throughout the leasing period. Further details of our future plans are discussed further in the “Prospects and Future Strategic Initiatives” section below. PROSPECTS AND FUTURE STRATEGIC INITIATIVES We look forward to FYE 31 March 2019 with much anticipation and optimism. As we are starting FYE 31 March 2019 with a strong balance sheet and sizeable cash balance, we believe that we can begin supporting growth throughout all our various businesses whilst exploring opportunities in other areas. PROPERTY DIVISION In Malaysia, we have been and continue to assess property development opportunities following the successful completion of Shamelin Star in December 2016. We believe landed properties such as linked houses costing no more than RM700,000 and apartments costing around RM350,000 to RM550,000 are still in good demand. Premised on the foregoing, Management is actively evaluating potential projects including pursuing joint ventures with land owners, and/or acquire lands or projects with immediate development opportunity. The pending completion of Portland Chambers is expected to generate revenue of up to GBP10 million. Throughout the development of Portland Chambers, we had a constant stream of projects to consider. However, the Board and Management opted to focus on completing Portland Chambers first before pursuing the next UK project. Once Portland Chambers is completed and most units have been sold, we may start looking at new opportunities in the UK property space. ENERGY DIVISION O&G remains a key sector globally and O&G prices have recovered from the relatively low prices in previous years. Brent crude and WTI Crude currently trade between USD70 to USD80 per barrel compared to approximately USD50 per barrel a year ago. However, ENRA is cognisant that its customers may still opt to be cost-effective and cashflow disciplined even though market conditions have improved. As such, ENRA will continue developing service solutions that can meet its clients’ requirements. The Group’s downstream services business that is currently anchored by ENRA Kimia, is anticipating opportunities to bid for the supply of specialty chemicals to RAPID once it comes online later this calendar year. As such, we expect our downstream services business to continue showing positive growth. The upstream O&G services business began generating revenue in April 2018 when ENRA SPM’s storage tanker and SPM solution was installed. As such, the financial contribution from this project will be consolidated in the financial statements for FYE 31 March 2019. Now that the Group has a track record in the upstream services sector, our team plans to bid for a wider variety of similar opportunities within the region. MANAGEMENT DISCUSSION AND ANALYSIS cont’d