SANLI: Targets Growth In Thai Solar Market & High Entry Barrier Chemical Production

Sanli CEO Sim Hock HengWe attended the FY2025 results briefing by Sanli CEO Sim Hock Heng and CFO Fredrik Tan.

The presentation deck is on the SGX website.

And the Q&A content (edited for brevity and clarity) below provides further insights:

Q: How many legacy projects from the COVID era are remaining in your order book?

CEO: Only one -- at the Tuas Reclamation Plant. This order was $174 million and was awarded in 2019. It is expected to be completed by early 2026.

Q: Relating to the EPC business, profitability seems to be worsening. Do contracts, especially with PUB, have cost adjustments to cushion against rising material and other costs?

CEO: Only civil works are inflation-indexed, allowing contractors to claim payment for inflation.

However, M&E (Mechanical and Electrical) work, which Sanly mostly undertakes, is based on lump sum. This is a risk we have to accept. 

Q: With legacy contracts completed, margins for the EPC business segment will start to normalise?

CEO: Yes. Our government jobs have been manageable but in the last two years there was high escalation in raw material costs, etc, leading Sanly to actively diversify into other industries.

We hope this stabilises. We aim to bid correctly while pushing hard on diversification. Other businesses, driven by the pressure for net zero, are in high demand, and we are looking to scale up our business in the industrial sector.

Q: Can you comment on Sanly's capacity to bid for new PUB EPC contracts? The last contract announcement won by the company was in January 2024. Why the lack of contracts won last year?

CEO: There are three parts to this.

1. The government has been slowing down the release of contracts.

2. Sanly has been building its capability. That's why our overheads increased tremendously in the last one or two years.

3. Sanly has been a bit more reserved due to the uncertainty in material costs over the last two years. Moving forward, we see more clarity in the sector.  We sense that the government is releasing contracts, believing many will come out in the next one or two years.

Q: For the O&M segment, do you project the same revenue and gross profit growth in FY2026?

Sanli CFO FredrickTanCFO: Contract awards are typically for two to three years, with recurring contracts called every two or three years. We have a very strong O&M team. By utilising internal resources and expanding the dormitory capacity, we are able to expand the workforce to grow the O&M segment. 

More than $50 million of contracts belong to the O&M segment out of the total $228 million order book. This provides visibility for the O&M direction and gross profit growth.

With synergy and scaled-up operations island-wide, we can lower overheads for O&M, leading to better margins.

Q: The renewable energy business in Thailand recorded $1.2 million in total non-current assets and $30,000 revenue in FY2025. When does the company expect the business to be material to Sanly?

CFO: The $30,000 revenue was from the first EPC solar project completed in October/November, so revenue was for a short period before the financial year end. Moving into FY2026 and coming years, Thailand and renewable energy will be our focus. We expect to see material result in FY2026.

However, solar revenue itself may not be significant compared to the group's EPC and O&M turnover.

But the gross profit margin for renewable energy is significant, more than 50%. We hope to duplicate this business model in Thailand so that after three years, there will be a material impact on Sanly.

Q: What are the risks involved in the renewable business and the opportunities?

CFO: Our focus in renewable energy is not limited to solar. In Thailand, there are also needs for water, wastewater, and gasification for waste. We aim to use connections with clients (mostly hotel or factory owners) to offer a more holistic range of services, including power, water, and other renewable energy-related businesses. We expect this to be material in perhaps two to three years.

Q: Your new chemical manufacturing (magnesium hydroxide) business -- how scalable is it and who are the competitors?

CEO: Presently, there is no company in Southeast Asia with a facility to produce magnesium hydroxide slurry. It is manufactured in other countries and shipped into Singapore for storage and sale. 

Regarding scalability, it took one whole year to complete the plant in 2023. It took almost a year for certification. In the last quarter of 2024, we were fully certified. We performed the first top-up for a major vessel company.

This is a good start, and we are in discussions to continue providing service. The number of vessels coming into and leaving Singapore indicates the scale of the opportunity.



Q: What is magnesium hydroxide slurry used for in a vessel?

CEO: In simple terms, it assists in desulphurisation. Vessels often use low-grade bunk fuel oil to maximise profit, which produces a lot of sulphur in the exhaust. Magnesium hydroxide slurry can be used to treat this exhaust system.

This process can reduce the sulphur level to 0.5%, well within regulations. It is more economical for vessels to use this treatment process as converting to better engines or cleaner fuel is currently less cost-efficient.

Q: Other competitors bring it from overseas. Would their cost competitiveness compared to manufacturing in Singapore and selling here?

CEO: While specific cost details cannot be shared, we are aware of the selling costs of chemical trading companies in Singapore. We aim to price lower than them to attract customers. Our cost of production is expected to be lower than their selling price.

Q: Is it difficult to onboard a new customer like a major shipping client? Is it difficult to get approved?

CEO: Definitely. Because it involves the vessel's system and it is a new product in Singapore, even with full certification, we have to prove it is safe for the ship. MNCs and shipping vessels require careful consideration before allowing supply. Successfully engaging one and completing the first top-up means this is no longer a hurdle.

Q: How do shipping companies currently get their magnesium slurry if there's no manufacturer in Southeast Asia?

CEO: Currently, vessels have to top up double the volume – enough to be consumed on the way to Singapore and enough to consume on the way back to their home port. By Sanly being able to provide the slurry in Singapore, vessels can reduce the volume they need to carry.

Reducing the volume allows them to free up space to carry more goods (containers), which is their core business, thus enabling them to earn more revenue.

CFO: With vessels waiting to dock, the customers are there. However, dealing with chemicals is difficult, as switching suppliers or products is not easy. Numerous tests are required to ensure the chemical is suitable and does not create hazards or impact existing systems. This is why it took a long time to register the first sale.

It is a business with a high entry barrier. A complex test process is needed to ensure fitness for purpose and no disadvantage to equipment or the vessel. In terms of opportunity, there are many vessels queuing daily to dock in Singapore. We have completed the first top-up and expect more vessel top-ups in the coming months.

Q: The company's net debt has increased significantly in 2025. What are the company plans to improve the balance sheet?

CFO: Equity is $30 million, and turnover has grown rapidly from $60 million in 2021 to $150 million in FY2025. We are growing very fast. At this scale, existing resources are stretched.

Borrowings are mainly for EPC and O&M projects. To generate more revenue at this pace, we had to increase borrowings from the bank. The high interest rate environment (compared to near zero pre-COVID) is a factor contributing to the decline in margins.

Plans to improve the balance sheet for higher turnover: