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Public company info - MECOM Power and Construction Limited , 01183.HK

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MECOM Power and Construction Limited, 01183.HK - Company Profile
Chairman Kuok Lam Sek
Share Issued (share) 1,194,000,000
Par Currency Hong Kong Dollar
Par Value 0.01
Industry Construction & Decoration
Corporate Profile Business Summary: The group is principally engaged in provision of construction services, including construction and fitting out works, and high voltage power substation construction and its system installation works; and provision of facilities management services. Performance for the year: The Group recorded revenue of MOP498.9 million for the Year, which represented a year-on-year decline of 16.5% (2018: MOP597.6 million). The Group recorded a gross profit of MOP102.2 million for the Year, which represented a year-on-year decrease of 7.3% (2018: MOP110.3 million), Gross profit margin reached 20.5%. The Group’s profit for the Year increased slightly by MOP1.3 million or 2.4%. Business Review During the Year, Macau’s construction market grew at a slightly slower pace due to a number of factors. As the Macau government devoted abundant resources in preparation for the election of Chief Executive in the first half of the Year and large-scale construction projects completed construction gradually, government approval on construction projects was delayed. Together with the overshadowing of the global economy by the China-US trade dispute and the slowdown of China’s economy, the construction investment market has taken on a cautious note in general. According to official data, private construction investment shrank by 20.4%, 25.1% and 26.3% year-on-year in the first three quarters, reflecting conservative investment sentiment in the market, which contributed to a decline in the number of newly commenced projects in Macau. Nevertheless, following the smooth transition of the new Macau government, the Macau government has increased project investment in the second half of the Year, leading to a 131.3% surge in public construction investment in the third quarter and stimulating the market demand for construction works. Meanwhile, the private market has progressively launched or resumed planned projects for expansion and improvement works. In terms of business operation, the proprietary core technology for structural steelworks, civil engineering services and fitting out and improvement works remains a major revenue source for the Group, followed by facilities management services and high voltage power substation construction and its system installation works. During the Year, the Group continued to leverage its proven track record and solid customer relations to secure over 30 projects, with a total value of over MOP800 million, including the integrated projects of hotels and resorts, provision of extra low voltage system, and ventilation and air-conditioning system for the Public Prosecutions Office of Macau (Phase II), as well as hotel-related construction and fitting out works and facilities management services projects. Still, the construction progress of these projects was stalled due to the aforementioned complex and everchanging environmental factors. It was not until the second half of the Year when favourable factors emerged such as the successful government transition and the smooth progression of a major project in Taipa, resulting in an accelerated revenue growth. With respect to high voltage substation construction and its system installation works, the segment contributed less revenue to the Group because the Macau government did not launch relevant projects and the Group had completed most of the works of the theme park for private casino gaming operator in Macau. During the Year, the Group focused on serving its existing clients, while reaching to new customers to secure more contracts for facilities management, alteration and engineering works. This resulted in a steady climb in the revenue contribution from maintenance works, which have short construction periods and bring about a stable number of projects, bringing stable and sustainable cash flows to the Group. MECOM boasts solid growth and an impressive engineering record. These achievements have not only provided the Group with greater success in securing major projects, but also allowed the Group to become the main contractor in most of such construction projects. The key position that the Group holds in these projects has enabled greater flexibility for the Group when subcontracting and has significantly improved efficiency in labour allocation, thereby lifting the Group’s overall profit margin. The Group also managed to establish a joint venture with two subsidiaries of a state-owned enterprise to boost its chances of success in future project tendering. The joint venture could offer tremendous impetus to the Group’s future development as the two partners have well-established track record and great market recognition. For overall business during the Year, the majority of the Group’s revenue was realised in the second half of the Year, with a total income of MOP498.9 million (2018: MOP597.6 million). The Group performed well through strict control on costs and expenses, coupled with high quality projects at hand and an array of premium clients, all of which brought about a moderate rise in gross profit margin and net profit margin to 20.5% and 11.3% respectively (2018: 18.5% and 9.2%). Prospects: Looking forward into 2020, the global outbreak of COVID-19 at the beginning of 2020 has led to short-term suspension of casinos and other entertainment venues in Macau, affecting the development plans of gaming businesses and resort operators, thus adding to the uncertainties for the construction industry. This, however, has a limited impact on the Group's project progression since part of the Group's construction team is from Macau and mainland provinces and cities which have not been heavily affected by the epidemic. With regards to development plan, MECOM endeavors to develop as a one-stop solution provider for high-quality and professional integrated construction services. Apart from provision of main structural steelworks that showcases the Group's superb techniques, the Group proactively provides repair and maintenance works for the Group's existing customers and undertake E&M system works contracts to further expand the Company’s business and consolidate its market leadership amongst Macau’s integrated construction works enterprises. As of 31 December 2019, the Group's total aggregate value of contracts on hand yet to complete amounted to MOP701 million. Together with the successful tendering of over MOP460 million worth construction and fitting out works of a hotel in early 2020, the Group recorded over MOP1.1 billion in total aggregate value of contracts on hand yet to complete in the first quarter of 2020. The joint venture co-established by the Group and two subsidiaries of a state-owned enterprise is expected to undertake the main portion of the new hotel construction works worth HK$6.5 billion in Cotai, which manifests the Group’s success in bolstering the chances of winning quality projects through the joint venture and thereby further amplifies the Group's profitability and market competitiveness. With regards to the external factors, the successful transition of the new Macau government and the continuous promotion of Macau as the world’s tourism and leisure centre will bring along long-term positives and impetus to Macau’s economic development. Gaming businesses are also expected to ramp up their construction demand and present growth momentum to Macau’s construction market. As such, Macau is expected to enjoy a promising long-term development. Nonetheless, amidst the uncertainty of the epidemic, MECOM will remain cautiously optimistic with enhanced internal management and business deployment to respond to future challenges. It will also keep searching for market opportunities, including identifying new clienteles and expanding business to the Greater Bay Area market, in order to secure a larger market share and better returns for shareholders.

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