SAPPHIRE: RMB 2 billion order book for China infrastructure jobs

Sapphire's new subsidiary, Ranken Infrastructure, is the only private land transportation EPC solutions provider in China with AAA-certification for the design, construction and project consultation of rail infrastructure. Above: Ranken's urban truck road project in Beijing’s urban district, constructed above underground pipelines for sewage, tap water and other facilities. Photo: Company

Following Sapphire's divestment of its steel business in 2014, the Group has emerged as a transport infrastructure play. Last October, Sapphire completed the acquisition of Ranken Infrastructure, China’s second-largest privately-owned rail transit infrastructure construction group.

Since being acquired, Ranken has won four urban rail transit infrastructure contracts in China totaling Rmb 1.3 billion (S$282 million).

Ranken’s order book was about Rmb 2 billion as at 11 May 2016, with projects to be delivered over the next 24 to 36 months.

The acquisition significantly boosted the Group's 1QFY2016 net profit to S$2.0 million (from S$470,000 in 1QFY2015). 1QFY2016 Group revenue had more than tripled to S$53.7 million with 82% contributed by Ranken.


Robust transportation infrastructure demand

In May, the PRC government announced a budget of Rmb 4.7 trillion for 303 tranport infrastructure projects in China, including railways, roads, waterways, airports and metro systems.

Ranken is also poised to ride on China's One Belt, One Road initiative to integrate Central Asia, West Asia, the Middle East and Europe into a cohesive economic area through multilateral co-operation to build infrastructure, increase cultural exchange and broaden trade.

In conjunction with the initiative, Asian Infrastructure Investment Bank expects to approve about US$1.2 billion this year to finance the development of transportation, water and energy infrastructure in less developed Asian countries.

To meet increasing infrastructure demand from these emerging markets in Asia, Sapphire intends to progressively scale up Ranken's production capacity over the next 12 months.

Ranken already has a track record for projects in China, Bangladesh, India and Saudi Arabia. For example, it constructed and managed the Alwaye-Petta Line of India's Kochi metro rail project, a major transportation project there.

The Group intends to bid for metro, urban rail transit and other major land transport infrastructure projects in China and in Southeast Asia.

Mancala provides raise-bore, shaft excavation, engineering services and other mining services.  Photo: Company

The other business segment of the Group is Mancala Holdings, an Australian mining services firm that Sapphire wholly acquired in January 2014.

Mancala has completed over 100 projects in Australia and operates Vietnam's largest nickel mine. It contributed 18% to the Group's 1QFY2016 revenue. Segment revenue fell by 37.5% year-on-year to S$9.6 million due to falling commodity prices.

"We sold some of Mancala's non-core assets, raised cash and used a lease-back model to streamline our cost structure," said Group CEO Teh Wing Kwan at an investor briefing on 24 June.

"We are talking to mining specialists who are looking to acquire highly efficient operators in a weak market. This could potentially lead to a strategic dilution of our stake in Mancala," he added.