09 October 2008

Riding the wave.

Of late, I received a couple of phonecalls from some well-known corporate people. They all asked the same question,

"How is the current economic crisis affecting you?"

I would then answer back promptly and confidently,

"It is affecting everyone in the whole wide world."

There is no point in lying about this fact. In this week alone, the world had witnessed the major downside of the Dow Jones, the Singapore Strait Times, Japan's Nikkei, Russia, Jakarta and many other indices. Top analysts from around the world with the top independent voices such as Merrill Lynch and Goldman Sachs have said that this is not the end yet - and the global financial crisis is looming.

But anyways, my opinion is that in this time of crisis, the ones with the most cash would be King. In terms of the construction industry, the ones with the largest order book with solid developers and clients would be the strongest.

We had somehow planned our tender strategy. At the time half a year ago, the commodity prices were touching record highs. Oil was trading above USD140, and steel bar prices were touching RM4,000 per ton and cement as well as concrete prices were skyrocketing.

This was the time when most of the contractors were worrying if the uptrend would continue - hence less keen to take up new projects. However, for us, we had gone pretty much all out to obtain new projects. After all, we felt that this was the peak. It had to stabilize and come down somehow.

We tendered at a buffer premium to mitigate the risks of an uptrend from the prices back then; even with those premiums, we managed to secure a few good contracts.

Hence right now, with the prices of commodities being on the downtrend, those contracts that were priced based on the peak prices had indirectly turned into increased profits. We are currently still in the initial stages of these contracts, and I feel that these would translate into improved numbers and figures come the FY2009. With a much improved order book, better rates and margins, I think we will be able to struggle through this financial turmoil. I believe the Group is able to manage the contracts more diligently than previously and improve on these figures thoroughly.

There's this Chinese word that mean dangerous. Dangerous consists of two other Chinese subwords - risk and opportunity. In tough times like this, I believe the Group can pull through and convert the calculated risks involved into big opportunities.

We will ride this wave.


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