Tech-savvy & 'without peers'
By A J Leow
 It would be hard pressed for the building maintenance services division of the CNA Group to maintain its 10% to 15% share of the overall contribution to the annual turnover of the company, noted Group President & CEO, Michael Ong.
But that's because CNA, which started off in 1990 as a system integrator and provider of intelligent control and solutions for buildings and public facilities, mostly in Singapore is now on the cusp of its next phase of elevated growth in spite of the current global economic slowdown.
As Mr Ong explained, "We used to generate S$30 million to S$38 million dollars a year in revenue between 2004 and 2005. That jumped to S$60 million in 2006. We have since crossed the S$100 million threshold in 2008. For the first quarter of 2009 alone, our group revenue was S$32.8 million and we are on track to surpass a S$100 million again this year. So to jump from 10% of S$30 million to 10% of S$100 million would be rather challenging for a division that provides consistent, stable income."
In fact, as of the first quarter of 2009, CNA has already accumulated an orderbook of S$130 million, thanks largely to a slew of overseas building and infrastructure projects in China and the Middle East.
If the company's bid for the Muscat and Salalah International Airports in the Sultanate of Oman (total contract value of about US$500 million) as part of a consortium effort proved to be successful, it could increase group revenue significantly over the next three years.
Come 2010 and 2011, CNA also expects to see the fruits of its investment forays to bear bigger fruits in Vietnam, where it hopes to clinch multi-million contracts for new townships, airports and other transport infrastructure projects. It has already clinched its maiden contracts this April for two residential developments by Keppel Land and CapitaLand worth a total of S$9.3 million.
The group has also set up a beachhead in India last year through a joint venture with Zicom Electronic Security Systems, a security and building control specialist with a footprint in 30 cities on the subcontinent.
 The bulk of its projects in China, Vietnam and the Middle East have been secured through the group’s two other divisions – the Information Communication Technology (ICT) division and its Mechanical, Electrical & Plumbing (MEP) arm.
CNA had crossed a major milestone in 2008 when its MEP division landed the US$110 million (S$154 million) project for the Nad Al Sheba racecourse in Dubai. Other Middle-East projects include the Discovery Gardens in Dubai and the Doha International Airport.
For the financial year 2008, CNA's operations in China contributed S$24 million or 23.8% of total turnover, the Middle East 39.4%; Singapore 31.2% with the rest of Asia Pacific region accounting for the remaining 5.7%.
Overseas contributions to rise
Mr Ong expects the group's income from abroad to increase from about 50% during the past two years to 75% this year, and in future up to 90% of overall revenue.
 That is despite the company's track record of landing numerous landmark and award-winning projects in Singapore such as the new Changi Prison Complex, Fusionpolis, Toa Payoh HDB Hub as well as Kandang Kerbau, Tan Tock Seng and Khoo Teck Puat hospitals.
"Singapore will continue to be the test-bed for our new technology in building controls systems such as those in environmental technology, but the contributions will be dwarfed by overseas contributions," said Mr Ong.
The company, which had made its reputation initially as an ICT specialist and building maintenance service provider in a broad range of projects such as commercial and government buildings, schools and hospitals, even manufacturing facilities such as most of the wafer fab plants here in Singapore, has since made inroads into aviation hubs, transport infrastructures and more recently wastewater treatment plants in China.
Its clientele includes many companies and government bodies in Singapore, Malaysia, Myanmar, the Philippines, Thailand, Vietnam, India, China and countries in the Middle East such as Qatar and the UAE.
Mr Ong said the group, which has a total staff strength of more than 500 and growing, is "without real peers" in the region.
"We may compete occasionally with the likes of IBM, NEC, Siemens and HP in certain projects but we are also a system integrator in that they are also our technology partners in the systems we employ for other projects we bid for."
"There isn't any other company I know of that have the critical mass in manpower to do what we do. Some of the IT multinationals which we used to compete with like Philips and Tyco have since cut back on their staff strength here to focus on niche areas whereas we have never retrenched any of our staff despite encountering a few down cycles over the years. Hence we have managed to retain the core expertise, and it's not possible for new players to build up such a skilled and experienced task force from scratch over a short period," said Mr Ong.
He said that such expertise, which extends to areas such as Intelligent Building Management Systems (IBMS), Intelligent Facility Management Systems (IFMS), Connected Real Estate (CRE) and Internet Protocol (IP) building platforms has enabled CNA to evolve from a system integrator for buildings to large townships in China such as the Singapore-Hangzhou Science & Technology Park.
Technological alliances with the likes of IT and networking specialists such as Cisco and Microsoft have also helped the group to gain a competitive edge as a first-mover.
The deployment of these technology, noted Mr Ong, enables the building owner or township operator to monitor and integrate the control of a wide spectrum of systems from fire, security, car park management to air conditioning, lighting and communications systems such as telephony and Internet under a single platform. The installation of wires and cable networks are thus made more uniform and easier to upgrade. In the case of IP technology, the cables and wires can even be replaced by wireless networks.
Gearing up
Growth for CNA over the years had been an admixture of both organic as well as through mergers and acquisitions (M&A) due to the group's strategic expansion in overseas markets.
Some of these acquisitions have included stakes in the US-based Jordan Acquisition Group (JAG) which is a developer of building automation systems through its Dubai-based subsidiary as well as Chinese wastewater treatment companies such as Standard Water Ltd (SWL) and the Xiamen Leccan Technology Co Ltd. SWL continues to work towards a public listing which will help to unlock CNA's value in future.
"It's not easy and often more costly if you rely on an organic approach in order to penetrate new markets. We often acquire or form joint ventures so that the other party can provide the local connections while we offer the technological know-how and experience," said Mr Ong.
Looking forward, he expects the Middle East to provide CNA with its future pipeline of the bigger, multi-million mega projects while those from China will be on a smaller scale, usually below S$50 million.
"The reason is that in the Middle East, they tend to call for bigger turnkey projects while in China, the usual way is to offer smaller parcels within a project," said Ong who however added that the huge size of the mainland market allows the group to be more selective in choosing projects that have higher margins.
CNA employs the same selective approach to its projects in Singapore, one of which will be the upcoming installation of a more energy-efficient plant including a maintenance contract for the Grand Hyatt Singapore. "We normally don't compete on price but on the innovations we are able to offer. In this way, the margins are also better and we are able to secure longer-term maintenance contracts," said Mr Ong.
In light of the current global financial conditions, the company has been sharpening its focus on cash management with accounts receivables cut from 130 to 110 days in FY2008. These measures have led to improvement in cashflow with the group closing the last financial year with S$20.5 million in cash and cash equivalents.
The group has a current gearing of about 0.4 times compared to 0.22 in FY2007. However, Mr Ong expects that figure to rise in the foreseeable future as the group enters the bigger league.
"You can't grow and be bidding for S$400 million to S$500 million contracts without gearing up. We have always pride ourselves as an innovative company, and that means to be innovative in not only our application of technology but also our management practices and outlook in keeping the company growing."
CNA was first listed on SESDAQ in March 2005, and has since been promoted to the mainboard of the Singapore Exchange in September, 2007
For more info about the company: http://www.cna.com.sg/
|
Up to-date current Financial News for Investors
