Access Engineering could be re-awarded sections of road projects
View(s):After the new regime’s evaluation of most of the key projects (Outer Circular Highway Phase III, Central Expressway and Southern Expressway Extension), business analysts say that these would recommence with certain modifications to the scope and cost and that Access Engineering (AEL) – in an industry where the construction companies are the market makers given the supplier deficit – could be re-awarded a certain fraction of these projects.
“AEL being a player in the local construction industry is faced with ample growth opportunities and given its competitive advantage of control in the entire supply chain, it is well positioned as against its competitors such as MAGA, Sierra and Sanken Construction,” a Softlogic Stockbrokers report said. AEL’s continued capacity building and investments would further strengthen its position to grasp these opportunities, it added.
It further said that the temporary halted construction projects (roads and highways, bridges and flyovers) would recommence in due course and AEL would be a beneficiary of the same. “However as further diversification, AEL would be increasing its exposure in real estate and is currently looking at renewable energy such as mini hydro power.”
AEL saw its revenue increase 4.5 per cent year-on-year (YoY) to Rs. 4,585.3 million in 4QFY15 mainly on the back of Sathosa Motors edging up near 7 per cent YoY (28 per cent contribution to the top line).
The report said that the construction sector was unable to grow revenues as its currently operational key road rehabilitation project continued to undergo delays in construction. “Thus the concluded quarter saw the project recognizing no revenues although the balance is to be recognised in FY16E.”
AEL has also focused on geographical diversification by creating its presence aboard, where AEL has taken the first step in the Pacific region. The company undertook work for one of its Chinese partners at the biggest port in Papua New Guinea, Port Lae. AEL further plans to extend its international operations, however paying particular attention to the risks involved as the company hopes to partner with its principals. Currently the company is on the lookout for opportunities in East Africa and the Middle East with current strategic partners.