SINGAPORE (July 3): Little-known contractor and property developer Logistics Holdings claims to have patented a way to turn waste marine clay into a material that can be used as a substitute for sand. If it succeeds in commercialising the process, the barely profitable company with a market cap of just $37.4 million could draw a surge of market interest.
Some eight million cu m of marine clay is dug up at Singapore’s construction sites every year. Contractors generally pay about $30 a tonne to have this wet, silty soil and other construction waste trucked away and dumped. On the other hand, Singapore’s construction industry has a voracious appetite for sand, and export bans by neighbouring countries have caused prices to skyrocket in the past. At the moment, Singapore imports most of its sand from Cambodia, Vietnam and the Philippines for about $15 per cu m.
With funding from the Building and Construction Authority and other government programmes, Logistics Holdings says it has developed a machine that dries the marine clay and transforms it into a sand substitute. This new material has been trademarked as “NewSoil”. Logistics Holdings has set up a 60%-owned subsidiary called New Soil Technologies to commercialise this system. The remaining 40% is held by Vincent Tan, a supplier of building materials and friend of Phua Lam Soon, CEO of Logistics Holdings.
“Hopefully, this will become our new earnings stream,” says Phua, in a recent interview with The Edge Singapore. According to him, New Soil Technologies is trying out two business models for NewSoil. One model involves parking the machines at a construction site, so that marine clay that is dug up can be immediately processed into NewSoil and used as a substitute for sand at the same site. Alternatively, New Soil Technologies will accept marine clay from large infrastructure projects for processing at its plant, and then on-sell the finished product to other buyers.
Whatever the case, Phua says New Soil Technologies will generate two sources of revenue: a fee for disposing of the unwanted marine clay and income from the sale of NewSoil as a sand substitute. He adds that NewSoil will be priced at a substantial discount to the prevailing price of real sand. “It also depends on the size of projects. If it is a small one, we charge higher, but if the projects are bigger, then the prices will be different,” he says, adding that the “main revenue potential” for the sale of NewSoil is likely to come from ongoing land reclamation projects in Singapore.
Phua declines to discuss how much revenue Logistics Holdings could generate from this new venture, but he lets on that New Soil Technologies plans to operate 10 to 20 processing machines, each with the capacity to process between 20 and 30 tonnes of marine clay an hour. According to him, trials have already been run by New Soil Technologies at some construction sites, where the processed marine clay was used to construct temporary access roads. Logistics Holdings could begin to book revenue from this new business as early as calendar year 2018, he says.
Logistics Holdings was listed in January 2013. Its core business is construction, and it has a subsidiary that does interior fit-out works at its projects. Its order book currently stands around $100 million. The company also has a modest property development business. Its eight-unit cluster housing project at 21 Paya Lebar Crescent recently obtained its Temporary Occupation Permit. Logistics Holdings is starting to market these units at around $3 million each. The company has also started selling units at its mixed development project at Iskandar Malaysia, comprising 70 factory units and 20 commercial units.
For the six months to Dec 31, 2015, the company reported a 73.9% y-o-y dive in earnings to $376,000 on a 47.9% y-o-y fall in revenue to $42.5 million. Net asset value as at Dec 31, 2016, was 15.28 cents, down slightly from 15.49 cents a year earlier. Shares in Logistics Holdings are down 25.42% since the beginning of the year. It last traded at 22 cents on June 2. They are currently trading at 1.43 times NAV.
