ARB and Arbiot diversification into IT business fuelling growth

The company’s diversification from its timber business has been gaining traction and is a boon to its earnings


ARB Bhd’s diversification from the timber business into information technology (IT)-related services has been gaining traction and is a boon to its earnings.

Formerly known as Aturmaju Resources Bhd, ARB has rebranded itself from a little-known Sabah timber firm to a technology solutions provider and returned to the black, with a record quarterly net profit of RM5.08 million for the three months ended March 31, 2019 (1Q19), compared to a net loss of RM649,000 it posted a year prior.

1Q19 also saw ARB’s revenue surged to its highest since 2015 at RM12.43 million from RM79,000 a year ago.

The 1Q19 revenue was close to the RM15.23 million the group achieved for the entire financial year 2018 (FY18).

ARB was initially involved in the manufacturing of various types of woods, software development, contract logging, leasing scows and tugboats, provision of management services and investment holding.

Today, in an effort to survive in a tough environment, ARB has diversified into IT solutions, developing enterprise resource planning (ERP) system to cater for small and medium enterprises and manufacturing business operations in Malaysia.

Most recently, the firm through its wholly owned Arbiot Sdn Bhd has announced its collaboration with two Chinese companies for the provision of water supply-related technology, with a combined project value of RM800 million.

Arbiot signed a memorandum of understanding (MoU) with Hangzhou Mayam IoT Tech Co Ltd to deploy smart metres to measure, collect and analyse water consumption information — with the project valued at RM200 million.

The corporate announcement has pushed ARB’s shares 2.3% higher to 45 sen from 44 sen on Tuesday. Trading volume doubled the average for this time of day and almost tripled the 20-day average.

Prior to this, the company bagged two new Internet of Things (IoT) system and engineering, procurement, commissioning and management (SEPCM) contracts worth RM18 million and RM60.4 million each, which analysts believe will generate higher earnings for ARB.

In addition, ARB has acquired a re-energy business for a green project for a 30-year concession period to perform the installation, operation and management of the solar photovoltaic (PV) system, which is likely to generate decent cashflow for ARB going forward.

The group has also entered into an MoU with Chean Chhoeng Thai Group Co Ltd (CCTG) to provide the IoT and IT services to CCTG’s mixed-development project in Phnom Penh, Cambodia.

The agreement marked ARB’s maiden foray into Cambodia, and the IoT and IT project value for Arbiot is about US$100 million (RM412 million).

Hong Leong Investment Bank Bhd (HLIB) in a note recently stated that following the profitable FY18 and two consecutive quarters of strong earnings, ARB’s IT-related services and ERP solutions are likely to bring record earnings.

New management at ARB has managed to secure projects worth RM260 million year-to-date.

HLIB reckons the company is growing aggressively and earnings visibility may sustain for the next one to two years.

“With the expansion in the IoT segment, they have been awarded two contracts. On May 29, ARB was awarded an RM18 million contract to undertake the IoT SEPCM project for a year.

“Another IoT SEPCM contract worth RM60.4 million has also been awarded to ARB to be completed within the next 18 months. We view this as a positive catalyst for the already turnaround company in FY19,” it said.

In May, ARB acquired a 51% stake of C&M Renewable Technology Sdn Bhd and the acquisition will open up the re-energy solution segment. The company’s roles are to provide technology equipment and assets, and perform installation, operation and management of the solar PV system, according to HLIB.

Over the past one year, ARB has advanced 125% and in the last 30 days, it rose 4.7%. The current market capitalisation of ARB stands at RM68.35 million.