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SEDANIA Innovator Bhd aims to continue banking on the trend of sustainability as environmental, social and governance (ESG) increasingly becoming a buzzword.
Sedania went public on the ACE Market of Bursa Malaysia in 2015. In the middle of last year, its shares saw a surge, hitting a high of RM1.46 a piece in late May. Its share price has since been on a downtrend, closing yesterday at 34 sen a share.
The company posted poor results recently. Net profit in the first half ended June 30, 2022 fell by 88% year-on-year (y-o-y) to RM813,000 as revenue also declined 35% to RM18.12mil in the same period.
“Growth in our financials will be strong next year. Many companies today would like to embrace sustainability and ESG goals,” managing director and founder Datuk Azrin Mohd Noor tells StarBizWeek.
Explaining the recent drop in the first-half performance, Azrin says clients in the sustainable energy segment has held back on expenditures.
“The first half saw all our other businesses improving minus the sustainable energy portion. But what is positive is that these sustainable projects by the companies will be implemented in the second half of the year,” he says.
Sedania’s main business is the provision of sustainable solutions such as advisory, auditing and implementation for companies wanting to save on energy costs.
“If you compare these numbers to last year’s numbers, there is this big portion missing from the sustainable energy segment as it is project based – the moment we complete these sites, then the revenue can be recognised.
“We had planned for it to be done throughout the year but it happened in a way where it accumulates to the end of the year. We should see a jump in the second half,” says group chief executive officer Daniel B. Ruppert.
More jobs
Ruppert adds that the company will be busy for the next 24 months – with its largest client being Telekom Malaysia Bhd (TM) which he believes would contract Sedania to work on more new sites next year.
“We are also expecting new sites from Pos Malaysia. We have a few manufacturing companies that are coming up in Penang. We are also expanding the team,” Ruppert says.
“Our first contract with TM was to complete 10 sites – which translated to RM24mil in our order book. In the next phase, it has granted us 24 sites,” Azrin explains.
Azrin says Sedania initially started doing this job for the banks before moving on to TM and other companies.
“We will audit the company and give solutions on how they can save on their energy costs. This will have a positive impact on their bottom line,” Azrin says.
After the audit, the company will propose to either replace, upgrade or modify the building’s equipment such as chiller systems so that it will be more efficient, Rupert explains.
“We have four to five different technologies that we can put into the buildings which makes the difference in energy costs.
“Most of our competitors’ background lies in one of the technologies – they can be focused on aircond engineering or an electrical optimiser company,” Ruppert says.
“We are coming from an investor point of view and we don’t really care about the vendors of these technologies as we can utilise any one of them to help our clients,” he adds.
Rising receivables
Sedania also saw a 35% rise in its receivables, deposits and prepayments to RM13.4mil as at Jun 30 from Dec 31, 2021. Rupert explains this is part of how its business operations worked.
“It is a normal part of our business. This is as our clients don’t incur capital expenditures on what we do for them such as upgrading their chiller systems.
“We prepay everything and we lease the equipment over the contract duration. Then the client pays us a portion of the energy savings every month,” Ruppert says.
“It is like an installment payment towards the lease rent. This is why we recognise these as receivables first,” he adds.
Meanwhile, Azrin says the company plans to grow its sustainable healthcare business, of which its 51%-owned unit Offspring Inc Sdn Bhd is in.
It acquired the stake in Offspring in 2020.
Offspring manufactures early child-care solutions such as organic baby products out of Australia. The administrative, marketing and branding team of Offspring is based in Petaling Jaya, Selangor.
“We would like to increase the product base to cater not just for babies but also older age groups such as toddlers, young children as well as mothers,” Azrin says.