Toyo Ventures surges forward despite hiccup in the RM11.4bil project

The good run appears to have legs following the pullback from the 52-week high of RM1.65.

Follow-through buying may lift prices towards the historical resistances at RM1.50 and RM1.58 next.

The counter has been rising from its year low of 80 sen and the continued upward momentum spells good news to investors.

But things do not exactly look rosy for the engineering, procurement, commissioning and construction (EPCC) contractor.

On July 1, Toyo Ventures said it has postponed the commencement of (EPCC) works for its thermal power plant project in Vietnam by up to six months.

It had entered into a second addendum to the EPCC contract with Sunway Construction Group Bhd and Vietnam's Power Engineering Consulting Joint Stock Company 2 (PECC2) for the extension.

Under the previous addendum to the EPCC contract inked in October last year, the NTP was to have been issued by June 30.

The contractor, which is the consortium between Sunway and PECC2, will only commence work once the NTP is issued.

Once the notice is issued, the project is scheduled to be completed in four and a half years.

The initial EPCC contract, worth US$2.42 billion (RM11.41 billion), was signed in March 2023.

SunCon in May said EPCC works for the 2.12-gigawatt (GW) Song Hau 2 power plant project in Vietnam's Hau Giang province had yet to begin because the consortium was waiting for the project’s build-operate-transfer firm Song Hau 2 Power Co Ltd (SH2P), a wholly-owned unit of Toyo, to issue the NTP.

The project’s exclusive mandated lead arranger, Export-Import Bank of Malaysia Bh was to arrange the proposed syndicated financing facilities of up to US$2.42 billion for the project.

However, Toyo said in JUne that SH2P had secured a US$980 million equipment financing facility from i-Power Solutions Pte Ltd to finance up to 70% of the invoice amount for the procurement of equipment required for the EPCC works of the project.

Such uncertainties do not augur well for the company, which has not performed well financially.

For the second quarter ended Mar 31, 2024, the company plunged into the red with a net loss of RM12.98 million from a net profit of RM988,000.

Its revenue fell to RM18.74 million from RM21.82 million a year ago.

It seems that investors are optimistic Toyo might spring a pleasant surprise but should be cautious on the mid-term outlook on company.