JAKS and the Water Transfer Project

With the impending tender of the Langat 2 project in the second half of 2007, besides KPS which will benefit in terms of engineering design and project implementation, the other company could well be JAKS Resources.

The tunnel will be undertaken by Japanese engineering firms and contractors since a soft loan from Japan will be used to finance this project. However, the project will require three meter diameter sized pipes to siphon water into the tunnel in the Main Range on the Pahang side and after exiting the tunnel, the water needs to be transported by pipes to the Langat 2 Scheme in Selangor. Right now, there is no company in Malaysia which is producing such pipes due to the lack of demand.

However, if there is a project that requires such pipes, JAKS is poised to supply them. All it need to do is to modify its production machinery and voila! you get the pipes. JAKS has in fact supplied steel pipes up to 2 meters before to SPLASH. JAKS's steel pipes are coated on the outside with cement, fiber-glass tissue and bitumen on the outside to prevent rust.

JAKS is not only a supplier of pipes. It is also a sub-contractor for water work projects. SPLASH's reservoir was actually constructed by JAKS and they laid all the pipes there as well. As such JAKS intends to bid for sub-contractor works under the Langat 2 project. It is also involved in a water project proposal in Kedah and Malacca.

On top of that, it is venturing into the oil and gas sector with its buying over of a company, Empire Deluxe Sdn. Bhd. that will be supplying seamless steel pipe fittings to markets in Canada and the U.S.

JAKS's share prices moved up vigorously all morning and settled down finally to close at 79.5 sen up 4 sen from last Friday's close of 75.5 sen. The intra-day high was 83 sen. The lowest price this year was 47.5 sen on 22 March 2007 and the highest;94.5 sen on 23 April 2007.

As a company, JAKS made RM 2.632 million in 2006 but as a group, the losses amounted to RM5.98 million.

I believe JAKS is a good company to buy on a longer term because of the water and oil play. I will recommend a buy at any price below 70 sen when the market pulls back.

Heartsong