What new initiatives does AWC have planned for 2012?
MERICAN: We have several initiatives for 2012. Our number one initiative would be our green projects. We've got a JV with a company from the UK called RDM, which is promoting energy saving devices; this is something that we've started here in Malaysia with a bang. We’ve looked at expansion into new markets and right now we’re in New Delhi, India. We’re also looking at building solar farms, which is a project we will be starting very soon.
Among the various services AWC offers, which comprises the bulk of your revenue stream? How are you looking to expand your less prominent services?
MERICAN: The biggest business that we have is in facilities management. Our automated waste collection system is also a big part of our business; we're one of the top 3 companies in the world offering this service. The two of these services combined take care of about 80 to 90% of our revenue. We are quite certain that this number will continue with the top line growth but the mix should remain the same.
What new markets are you most keen to enter?
MERICAN: Our success is based in offering the customer a better product at a better price. We were very focused in delivering quality and we customized our systems. I think this is one of the key things that allowed us to beat our competitors and we will continue to do that. We've also been quite successful at keeping overheads low. In that sense we've been quite price competitive. We're currently in New Delhi, India and we’re looking to expand to other Southeast Asian markets. Malaysia has been quite strong in terms of growth; there are many new projects coming online which will make things quite interesting in the next one or two years. Singapore is another market that looks promising to us and we are looking at possibly entering into the Indonesian market. These are quite interesting times for AWC because we have come back nearer to our home after doing some business in the Middle East and we look forward to working closer to our home base.
In 2011, AWC posted more than a 40% decline in profit from the prior year. At the end of the current fiscal year, do you expect these numbers to continue their downward trend or will we see higher numbers?
MERICAN: It was a 30% drop in terms of the profits after MI. It was a tough year because there was a delay in 1 or 2 projects that we were working on, which resulted in not being able to build as much. That’s something which is an inherent risk in the markets in which we operate. We've seen this trend continue and that’s why we’re trying to re-position ourselves in various markets. This seems to be a trend and as global growth slows down, you will see that it will have an effect on development projects. For the next couple of years, taking a long-term view, I think we are looking at growth.
Do you think the current share price of AWC is fair?
MERICAN: If you look at the share price of AWC and you look at the amount of cash we have you can see that we’re almost a cash counter. I do not think that the share price is a true reflection of the company’s earnings potential.
What are the major current trends in the facilities management industry in Kuala Lumpur?
MERICAN: I think the facilities management industry is a very nascent industry. Facilities management in Malaysia has been gaining some prominence but I think as an industry we’re still very young. Many organizations are still not familiar with facilities management, which provides an opportunity for companies like us to educate. The industry’s got to get its act together. At the moment there are too many players and so we must regulate the industry more. We've got to make sure that companies that are claiming to be facilities management companies are in fact facilities management companies. Otherwise, you have many players entering the market without proper processes and systems; this is essential because you need to keep the quality of companies in this business at a certain level. Again, it’s a very young industry and we have fairly new buildings in Kuala Lumpur, which, as time progresses, will need more servicing and maintenance. Many buildings are 30 to 40 years old but as they get older, the need to care and upkeep these buildings will raise and I think that’s when the industry will pick up.
I think the facilities management industry is a very nascent industry. Facilities management in Malaysia has been gaining some prominence but I think as an industry we’re still very young. Many organizations are still not familiar with facilities management, which provides an opportunity for companies like us to educate. The industry’s got to get its act together. At the moment there are too many players and so we must regulate the industry more.
How would you describe competition among similar facilities management solutions companies here in Malaysia? Who are among your biggest competitors?
MERICAN: Everybody's our competitor; this is an industry where the barriers to entry are not high. That's what I mean when I say that you have to certify companies who are real players in facilities management. There is intense competition, but this competition is in a market where price is the main determinant and where it is important that the budgetary process is done correctly. The total cost of asset ownership must be understood, meaning to say, if you have a building you should know what the total cost of owning that building will be. It’s not just the construction cost of the building but also the upkeep, refurbishment, and other maintenance costs that must be calculated into a 30-year outlook. At that point, you can budget for the upkeep properly. When you do that properly you know you will save on expenses; we are seeing more companies understand this key concept. This is what we want to focus on and we see value in the market. Additionally, I think there are many price issues in the industry but we have tried to avoid this. The facilities business here in Malaysia is open to competition and when times are not so good you get more companies going into this business because barriers are low. This is something that industry players must address.
In recent years your company has expanded its services in environment and green technology. What are your projections for the growth of this sector in Malaysia?
MERICAN: Without mentioning specific numbers, generally speaking, we feel that the green business is still very young. We think that there should be a little government sponsorship in terms of promoting this business and to accelerate the takeoff of the green business in Malaysia. You've got the feed-in tariffs online this year, which I think is a good move. It will take some time however to see the growth of our green business. We've got other businesses that are stable and we feel that we can grow them both in Malaysia and regionally. That’s what we’ll be focusing on. We’re also looking for new partnerships and how we can grow our business abroad, which is why we've been teaming up with foreign players.