INTERESTING changes have been taking place in HB Global Ltd over the past several months.

       The group has ventured into the business of laying fibre optic cables, making a leap from its previous focus in making frozen and ready-to-serve foods.

       It is also “moving out” of China and plans to make Malaysia its prime focus,.

       Looking ahead, although it did not provide a timeline, HB Global expects 70% of its revenue to come from its new telecommunication infrastructure development business.

       And to achieve this target, HB Global will be spending RM20mil to boost its capacity and invest into companies that offer growth potential.

       The group’s diversification into the telecommunication (telco) infrastructure business kicked off after it announced on April 1 the acquisition of a 60% stake in Forward Resources & Construction Sdn Bhd (FRC) for RM66mil.

       Founded in 1993, FRC is involved in construction and engineering services, including fifth generation (5G) infrastructure, for the telecommunications industry.

       HB Global executive director Lee Ping Wei (pic below) says that FRC is the only company in Malaysia that has the expertise to lay fibre optics cables using robotic services through a state-owned sewer system.

       Lee Ping Wei

       “This is mainly due to the investment into Swiss-German technology that enables the installation of fibre optic cables through the national sewerage system,” he says.

       Lee was appointed as the executive director on Feb 8 this year. This came several months after an individual named Keh Chuan Seng emerged as a substantial shareholder in HB Global in July 2020, with a 32.1 stake.

       Keh is currently the chairman of HB Global.

       Lee adds that the acquisition of FRC provides growth opportunities, “more than just becoming a telco infrastructure developer”.

       This includes allowing HB Global to tap into robotics services and other technological expertise.

       “In terms of the gross margin, we’re looking at around 20% to 25% for the construction and engineering solution services we offer for the development of 5G infrastructure.

       “It gives us a sustainable recurring revenue with a comfortable margin compared to our existing business in the frozen food and ready-to-serve business as well as the food and supply chain solutions,” he says.

       Over the next two to three years, HB Global is eyeing to ride on 5G infrastructure opportunities in Malaysia.

       The government has embarked on a plan to rollout 5G services beginning the end of this year, with three cities namely Kuala Lumpur, Putrajaya and Cyberjaya to be the first to enjoy the high-speed wireless Internet service.

       Digital Nasional Bhd, which is the government-owned entity set up to build, own and operate Malaysia’s 5G network, said on July 1 that it has awarded Erisson Malaysia with a RM11bil contract to rollout the 5G network in Malaysia.

       HB Global is eyeing opportunities from this, as FRC has about 28 years of experience in the development of telco infrastructure.

       FRC is also eyeing opportunities in the neighbouring countries.

       “Countries like Thailand and Indonesia are also looking at the development of 5G in the near-term albeit slightly slower than us.

       “The opportunities are there for those who are willing to take the extra mile, like HB Global. But it’s still too early to talk about overseas expansion at this juncture. A lot of negotiations and discussions are taking place, but it will take time for that,” says Lee.

       HB Global’s total orderbook at hand, through FRC, is about RM1.5bil.

       The clients are Telenor Procurement Pte Ltd (RM24mil), Maxis Broadband Sdn Bhd (RM385mil), Axiata Group Bhd’s unit On Site Services Sdn Bhd (RM10mil) and Asiana Citarasa Sdn Bhd (RM1.1bil).

       Lee declined to divulge more details about Asiana, but points out that there are two projects from Asiana covering the supply, delivery, installation, testing, commissioning, operation, maintenance and deployment of 5G infrastructure and solutions across Malaysia.

       A check on the Companies Commission of Malaysia (SSM) website shows that Asiana, which reported a profit after tax of just RM11,277 for the financial year ended March 31, 2020, is wholly-owned by an individual named Goh Tar Hong.

       The SSM filing mentioned that Asiana is involved in dredging, extraction, import and export of sand for construction purposes. It is also involved in the renting of machinery and vehicles.

       Lee says HB Global’s tenderbook size is in the range of around RM1bil to RM1.8bil, with a win rate of about 70% to 80%.

       “So, we’re looking at a replenishment of our projects of RM700mil to RM1bil every year,” according to him.

       Moving forward, Lee mentions that HB Global is open to increasing its stake in FRC, from the 60% equity interest currently.

       “But most importantly, we want to maintain the existing team that runs the company. It has proven itself to be a strong company that can deliver for our shareholders,” he says.

       With the increased focus on the telco infrastructure business, Lee points out that HB Global will reduce its exposure into the frozen and ready-to-serve foods businesses.

       However, he says the group’s food-related supply chain solutions, built upon its years of experience in the food and beverages industry, will offer new opportunities for the group.

       “Supply chain management has become an important element for most businesses, especially following the Covid-19 pandemic.

       “We leverage our experience and tap on cutting-edge technological solutions such as our own artificial intelligence algorithm to provide real-time intelligence and actional recommendations to reduce disruption in the supply chain process,” he adds.

       HB Global’s food-related supply chain solutions, as well as the telco infrastructure business, would help to improve the group’s cash flow position and provide more stable recurring revenue.

       As at March 31, HB Global reported a negative cash flow from operating activities at RM155,000, after adjusting for working capital changes.

       The group’s cash and cash equivalents were RM17.16mil, against short-term borrowings of RM43.32mil.

       “Of course, you must also be aware that most businesses have to face the negative operating cash flow environment partly due to the Covid-19 pandemic and the lockdown measures imposed to contain the spread of infections.

       “However, overall, I can say that the operating cash flow will improve going forward with our new venture and acquisitions,” states Lee.