KUCHING: Borneo Oil Bhd’s (Borneo) associate company Makin Teguh Sdn Bhd, which owns a cement plant in Sabah, has now obtained the requisite product conformity certificates for cement production.
Makin Teguh had undergone the required product certification process in accordance with the Malaysian Construction Industry Standards, according to Borneo in its newly released 2024 annual report.
Borneo’s managing director Datuk Joseph Lee Yok Min @ Ambrose said Makin Teguh is currently optimising its processes to improve operational efficiency in managing the fuel and raw material mix for the integrated limestone processing plant (ILPP).
The cement plant, which is part of the integrated limestone processing complex, commenced operations last year in Lahad Datu, and has an annual capacity of an estimated 220,000 tonnes.
The ILPP is located adjacent to Borneo’s limestone and marble quarry.
Despite the losses recorded in financial year ended June 30, 2023 (FY2023) and barring any unforeseen circumstances, Lee said the group remains optimistic in the turnaround of Makin Teguh by the end of 2025, upon achieving full commercial production of the cement plant.
In FY2023, Borneo’s share of pretax loss of Makin Teguh was RM59 million and this was reduced to RM40 million in FY2024.
Lee is commenting on the future prospects of Borneo group, which owns home-grown fast food chain SugarBun, in a circular to shareholder on Borneo’s proposed bonus issue of warrants and proposed establishment of a new employees’ share option scheme (ESOS).
Borneo proposes to issue up to about 3.52 billion free warrants (Warrants E) on the basis of one Warrant E for every four existing ordinary shares in Borneo held by the entitled shareholders on an entitlement date to be determined later.
Under the new ESOS, Borneo will grant options up to 15 per cent of the company’s total number of issued shares (excluding treasury shares) to eligible persons.
The new ESOS will be established after the proposed termination of existing ESOS takes effect.
Borneo will seek approval of its shareholders on the proposed bonus warrant and new ESOS at an extraordinary general meeting (EGM) on December 19, 2024.
According to Lee, the company’s board of directors intends to fix the exercise price of the Warrants E at a discount range of nil to 10 per cent of the 5-day volume weighted average price (VWAP) of Borneo shares immediately preceding the price-fixing date.
“The above-mentioned range of discount will allow the board to fix the exercise price of the Warrants E to incentivise the Warrant E holders to exercise the Warrants E and increase their equity participation in the company while also allowing the board the necessary flexibility to accommodate for potential fluctuations in prevailing market conditions and prices.
“For illustrative purposes only, the illustrative exercise price of the Warrants E is assumed at RM0.007 per Warrant E, which represents a discount of approximately 9.09 per cent to the 5-day VWAP of Borneo shares up to and including the LPD (last practicable date or October 15, 2024) of RM0.0077,” he said.
The Warrants E are exerciseable at any time for a tenure of five years from the date of issuance.
Lee said in addition to the mineral reserves held by the Borneo group for its property investment and management (PIM) segment, the group also owns prime land in Kota Kinabalu’s Kokol Hills (148.03 acres) and holds a significant landbank of approximately 971.61 acres on the East Coast of Sabah, with an additional 259.01 acres across other areas of Sabah.
“At this juncture, the group is in the midst of exploring for potential opportunities to capitalise and maximise returns from these assets,” he added.
On the prospects of the group’s food business.
Lee said Borneo has been focusing on growing its food and franchise operations as the segment accounted for 66 per cent of the total group’s total revenue in FY2023.
The segment reported sales of RM56.09 million, representing an increase of RM8.47 million or 17.8 per cent from RM47.62 million registered in FY2022.
“Currently, the food and franchise operations being the primary contributor to the group, is benefitting from improved market sentiment and has seen an increase in revenue following the introduction of its Sabasco hot sauces.
This is further supported by the expansion in cumulative number of outlets of SugarBun and Pezzo (pizza) from 118 to 127 outlets during FY2023.
“Further, the group is actively collaborating with GrabFood Delivery to offer promotional menus aimed at increasing its revenue,” he said.
On the group’s resources and sustainable energy (RSE) segment, Lee said following the completion of the ILPP, it is the group’s plan to utilise this segment as the purchasing arm for sourcing of raw materials which will help serve as an additional source of revenue alongside contributions from the sale of semi precious stones and limestone.
Lee said despite the global economy being on a growth trajectory, driven by resilient domestic demand and strong labour market conditions, the company’s board of directors remains to be vigilant as challenges, such as elevated core inflation, higher interest rates, geopolitical tension and uncertainty in major economies, still persist and continues to be key factors in the future economic development.
“Notwithstanding the above, in order to expand the business and improve the financial results of the group, the management of the group has continuously exerted efforts to explore for new business venture and segments to diversify the revenue stream,” he added.
