QL-backed BM GreenTech ups its game
THIS week, 13 companies listed on Bursa Malaysia were reclassified under a new renewable energy (RE) subsector to demonstrate their pivot into that space.
One of the stocks is BM GreenTech Bhd (BMG), a company that has kept a low profile and is 52.57%-owned by poultry giant QL Resources Bhd, which also rarely gives media interviews.
Founded in 2005, BMG was formerly known as Boilermech Holdings Bhd. It started off as a boiler manufacturer, specialising in biomass boilers for the palm oil industry. Hence, its previous classification under the industrial sector.
To fund its growth, the company tapped the capital market via an initial public offering in 2011. This was when QL entered as a strategic investor with a 35.03% stake.
Through mergers and acquisitions, BMG ventured into the water treatment business, and later the solar energy business by acquiring a stake in Tera VA Sdn Bhd, which designs and constructs solar photovoltaic systems for residential, commercial and industrial projects.
In 2021, QL raised its stake in BMG and with this backing, the company expanded further into the solar business.
The remaining interest in Tera VA was acquired in 2023 and then in 2024, BMG acquired 100% interest in Plus Xnergy Holding Sdn Bhd (PXH) for RM110mil.
PXH specialises in clean energy solutions as an engineering, procurement, and construction (EPC) contractor for residential, commercial, industrial, and large-scale solar (LSS) projects
Speaking to Starbiz 7, BMG group managing director Chia Lik Khai says the diversification into water treatment and solar complements the core bio-energy business.
“From the start, we have had a footprint in clean energy as our boilers are used by palm oil mills to generate energy from biomass.
“As a group, we are now well-positioned to capitalise on the growing demand for clean energy solutions in Malaysia as well as the region with QL’s geographic reach,” he says during the interview at BMG’s corporate office-cum-manufacturing plant in Subang Jaya.
The 45-year old Chia is the son of QL’s founder and executive chairman Dr Chia Song Kun, who was instrumental in growing QL to become the biggest egg producer in South-East Asia and a key player in Surimi-based product manufacturing.
Back to BMG, this corporate name was adopted in 2024 as part of a rebranding exercise.
By not putting all its eggs in one basket, Chia says the company will be less susceptible to the cyclicality of the palm oil industry.
“For now we are seeing planters holding back from replacing or upgrading their boilers amidst flattish crude palm oil prices and other priorities such as replanting of older trees.”
Currently, BMG holds 60% to 70% of the boiler market share in Malaysia. The company also has a manufacturing plant in Indonesia where it has captured 30% to 40% of the market share.
Bio-energy accounts for about 70% of BMG’s overall revenue, and this could be diluted to 50% in the near future, Chia adds.
“On the other hand, our solar energy segment is poised to ride on a new wave of investment in RE generation assets such as LSS, the Corporate Green Power Programme and Battery Energy Storage System (BESS) projects.
“Following the PXH acquisition, we plan to expand our presence across the value chain and engage more actively in government solar initiatives,” he says, pointing out that since 2013, PXH has installed over 400 megawatt-peak capacity, generating 2,000 gigawatt hours of clean energy.
Notably, the PXH acquisition included a profit guarantee of at least RM44mil over the next four years or an annual net profit of RM11mil. Another RM50mil investment has been earmarked for PXH’s growth, according to Chia. He reckons the solar segment could account for 40% of earnings by financial year ending March 31, 2027 (FY27), from 15% in FY24.
PXH recently ventured into BESS via a partnership with Leader Energy Group Bhd to deploy Malaysia’s first sodium-sulfur BESS at the latter’s LSS farm in Bukit Selambau, Kedah.
According to Chia, the partnership could allow BMG to tap into the BESS market with the government’s plans to deploy at least 500 megawatt of BESS by 2030 and there is likely to be additional expansion expected to support the country’s carbon neutrality goal by 2050.
Meanwhile, BMG’s water treatment segment is smaller vis-a-vis the other segments, contributing 11% to FY24 earnings. Currently, it is serving mainly the palm oil industry and also the food, wood, paper and pulp sectors.
However, there are potentially new areas of growth here with the influx of data centres requiring a lot of water to cool their servers.
Repurposing treated wastewater can address demand for water from data centres.
Chia says with the increasing focus on environmental, social and governance, there are significant opportunities in the green energy sector.
“Bio-energy, for example, remains untapped. In Indonesia, the government has introduced a co-firing initiative that involves retrofitting existing coal power plants to burn biomass fuel alongside coal.
“Malaysia is also taking baby steps in co-firing initiative under the National Energy Transition Roadmap. Going forward, we may look into co-firing solutions as part of our service offerings.”
With a healthy balance sheet, BMG has room to gear up and explore more M&As to support its continued growth.
However, Chia is mum on whether there could be more acquisitions in the near future.
Its growth story in green energy though has piqued investor interest. Since April last year, the share price has climbed steadily from 74 sen to trade at RM1.73 at the time of writing. This translates to a market cap of RM1.18bil and a price-earning (PE) ratio of 22.5 times.
There is no comparable local peer in the boiler space. Outside Malaysia, Guangzhou Devotion Thermal Tech in China, which is involved in biomass boiler manufacturing, is trading at a higher PE multiple of 38 times. In the solar segment, local peers on Bursa Malaysia are trading at an average PE of 29 times.
Prior to the PXH acquisition in mid-2024, BMG was trading at an average 13 times PE over the past year.