T7 Global to grow aerospace biz

The company’s net profit jumped 33.66% to RM1.4m in 2Q21 on higher contribution from its energy division


T7 GLOBAL Bhd is aiming to expand its footprint in the growing aerospace sector, which has attracted some RM20 million investment for land acquisition, construction of buildings and purchase of machinery and equipment since 2017.

Speaking to The Malaysian Reserve (TMR), T7 Global chairman Datuk Seri Dr Nik Norzrul Thani (picture) sheds light on the company’s corporate plans and outlook after building a sizable work orderbook and reputation in the oil and gas (O&G) business since 1990.

T7 Global’s net profit jumped 33.66% to RM1.35 million in the second quarter ended June 30, 2021 (2Q21), from RM1.01 million a year earlier, on higher contribution from its energy division. The company’s revenue for the quarter increased 49% to RM54.19 million from RM36.39 million a year ago due to the recovery in O&G activities in the region having a positive impact on its ongoing projects.

Below are some of the key talking points from the online interview.

TMR: Can you share how the company started and manage to go from red to black?

NN: Tan Sri Tan Kean Soon and I took over the company in 2015 and undertook a transformation programme. It was a tough time forusasanO&Gcompanyaswehadalotof governance issues we had to clean up and a lot of legacy issues that we needed to clear up. Crude oil prices had fallen and it was a bit of a shock but we’re lucky we came in new and were able to see things differently. So, we focused on diversification from O&G into a business that was not affected by oil price. We also started to focus on maintenance as we’re doing now — relying on 5-10 years contracts on maintenance. We turned T7 Global from an O&G company into a total industrial solution provider. I think it’s a question of perspective. O&G companies are still there, they are relying on oil prices but for T7 Global, besides O&G or energy as we call it now, we have gone into aerospace and defence and construction. It is more specialised construction and more high industrial based construction work. We want to be known as a high value industrial solution provider. We had a lot of highly skilled workers and thanks to the downturn of O&G at the time, we were able to reskill them to go into aerospace. A lot of training was done and we invested in people. Investment in human capital is important for us. We were quite lucky when transforming the company, we had a low gearing level that would impact our cash flow. Now we got some loans because we have a big project — a mobile offshore production unit (MOPU) contract worth RM1 billion. That is our major project and we will start to see payment coming in next year onwards. Tan and I tell ourselves it’s not a sprint but a long game because we are here for a long term. We are blessed with our loyal shareholders. We started to give dividends in the last few years as we have turned around but it wasn’t easy. Turn around sounds good but it’s a lot of stress but it makes us a better person.

TMR: What is your outlook for economic conditions and T7 Global?

NN: We are bullish with businesses opening up and consumer confidence remains good. As we are in an endemic environment, we have to be cautious and at the same time we need to restart. T7 Global is quite fortunate because we have orderbooks so we did not really panic when Covid-19 hit as we were able to manage. But I think with Malaysia stepping up vaccine distribution, I think things will be at least normal as one can be under the circumstances. I believe the 12th Malaysia Plan (12MP) will give a boost to businesses and foreign investment to come back again.

TMR: Moving forward, what is T7 Global’s plan?

NN: T7 Global has an orderbook of about RM2 billion for the next 10 years. We are bidding for about RM3 billion worth of work contracts. It is fortunate when we were in aerospace, we had a lot of support from the government and we had a lot of accreditations. In aerospace, accreditation is important, and we have to be accredited by Boeing and a lot of other international bodies — we are on the verge of getting that. We have a high value manufacturing facility in Serendah. We have staff trained, we had a relationship with the Institusi Kemahiran MARA where we took fresh graduates and sent them to Mexico to be trained by our partner to learn on aerotech. However, when everything was ready to take off then boom — Covid-19 hit. We were lucky in the sense that we were not at full blast but we already spent. The management was good, they were able to manoeuvre and there was a better “treatment plan”. So, despite orders down since the whole aerospace industry was in a bit of a shock, we were able to transform and survive by going not only on aeroplanes but going on other metal treatment manufacturing cars. With things picking up, we see fresh orders coming and we are ready. Our fully automated metal surface treatment plant is among the most advanced in South-East Asia so you can imagine the potential we have. With the support from the state and federal government, we are very confident moving forward. The aerospace industry is one of key strategic industries under the 12MP. We are very selective where we go to because we don’t want to be a “Jack of all trades, master of none”.

TMR: How much energy contributes to a group’s revenue? How about aerospace?

NN: Right now, 70% is from the energy business and 30% for the others. We think aerospace can take a larger chunk of our revenue. We are stable as far as our energy division is concerned but we need some time to get the aerospace business up and running. One thing about aerospace is that once you are in, you are solid because you are accredited. But to get in, the high cost is where the key is. The company’s aerospace and defence division business are picking up with its metal surface treatment facility receiving more jobs from local and international customers in the first half of 2021.

TMR: Can you share your plan on T7 Global’s recent private placement?

NN: T7 Global has proposed a private placement of up to 20% of its issued shares to raise up to RM43.93 million, which will be earmarked mainly to finance the group’s working capital requirements. We are actually looking for a strategic partner or investor that can give us value add because capital per say, we are alright, especially once the MOPU comes in. We have been postponing this private placement for a while as we are looking for the right partner.