• A leading water and wastewater specialist in Asia. Salcon is a premier water and wastewater engineering treatment specialist in Malaysia and other Asian regions since 1974 with a market capitalization of more than RM700m. Over the years, the Group has completed more than 900 water and wastewater projects in Malaysia, Thailand, Sri Lanka, Vietnam and China.
• In terms of prospects for water and wastewater projects, in the National Budget 2015, the Government will formulate a National Water Blueprint to ensure sustainable long-term water supply nationwide. These include holistic management of rivers, construction and improving water treatment plants all of which are expected to create opportunities for the Group.
• Salcon is currently tendering over RM1.8bn worth of water and wastewater related contracts . Malays ia remains the core market for the Group’s growth and expansion especially in the area of wastewater treatment where the Government is moving towards the construction of centralised sewage treatment plants in various cities and major towns to meet the growing needs . The Group has also submitted more than RM650m worth of tenders in Sri Lanka.
• In year 2012, Salcon diversified into property development industry to offset the lumpy construction and infra earnings. Its maiden project RES280 (located within Taman Selayang Jaya and Kepong with GDV RM157m) is expected to start contributing positvely by FY12/2017 upon full completion.
• JV with Ecoworld. Its plans to further grow Eco-Mid Town (strategically located within the Flagship Zone A of the Iskandar Malaysia) are likely to begin materializing in 2016 via a proposed RM1.2bn GDV mixed development (50:50 JV with Ecoworld) on a 12.5 acre land in Johor city centre, comprising retail outlets, serviced residences and strata shop-cum-apartments.
• Belfield Crest - the new epicenter of growth in downtown KL city. Salcon’s other venture (not with Eco World) is the 70%-owned Belfield Crest, located in the vacinity of the de velopment of the RM3-5bn KL118 tower (118- story Menara Warisan Merdeka). The RM1.3bn GDV comprises a hotel, service apartments and service suites (in planning approval stage).
• New recurring income stream from VBT. In May 2014, Salcon acquired a 50.1% stake in Volksbahn Technologies (VBT) Sdn Bhd for RM23.5m. VBT provides integrated technology services for the Prasarana group of companies - the asset owner of major LRT and monorail networks in Klang Valley. VBT has been granted exclusive rights to lay 108km of fibre optic cables on Prasarana's rail network and premises for up to 15 years (5+5+5). VBT has recently signed an MOU with Celcom Axiata to enhance connectivity and digital services for LRT and monorail users in the Klang Valley.
• Its 3 sen net dividend will go-ex on 26 June. Following the disposal of its water assets in China last year, Salcon has strong balance sheet with netcash of RM173m or 25 sen in 1Q15. It will also pay a 3 sen tax-exempt final dividend for FY12/2014 (goes ex on 26 June).
• Poised for an impending “flag” breakout. Chart-wise, since hitting YTD high of RM0.955 on 21 Apr, Salcon’s s hare price has been consolidating above lower Bollinger band near RM0.825 and form ed a continuation “Flag” pattern on daily chart. Hence, share price is expected to resume its previous uptrend as readings from daily oscillators are on the mend, which bodes well for an impending Flag breakout.
• Immediate resistance level is RM0.87 (downtrend line or 38.2% FR). A decisive breakout above RM0.87 will spur prices higher to test RM0.905 (15 June high), RM0.955 and our long term target price of RM1.00 (measurement objective of Flag breakout). Major supports are situated at RM0.825 and RM0.80 psychological level. Cut loss below RM0.77.

Source: Hong Leong Investment Bank Research - 24 Jun 2015