Hartanah Kenyalang Expects Margin Squeeze From US-Iran War, Implements Cost Measures

KUALA LUMPUR, April 8 (Bernama) -- Hartanah Kenyalang Bhd expects the ongoing United States (US)-Iran war to affect its margins, but the company will mitigate the impact by implementing cost-saving measures.

Its non-independent executive director and managing director, Seah Boon Tiat, said that following the award of the Stadium Sarawak contract, the company plans to subcontract certain specialist works to better manage and lock in costs.

“We locked in most of the materials for this project (Stadium Sarawak) early, before the war started. 

“Once we secured the project, most of the materials had already been locked in as it is a one-year project, and we had no time to source alternatives,” he said during the media briefing here today. 

Hartanah Kenyalang's wholly-owned subsidiary, Hartanah Construction Sdn Bhd, has secured a RM184.3 million contract from the Public Works Department Sarawak to upgrade and repair Sarawak Stadium, with a 12-month contract period from Jan 30, 2026, to Jan 29, 2027.

Additionally, Seah expressed hope that the government will continue applying the Variation of Price (VOP) mechanism to contractors, as it could help mitigate the overall impact on the industry.

“When there are events such as war or the movement control order (MCO), prices fluctuate significantly. The government may implement VOP to assist contractors.

“Typically, the government will assess the situation, as it does not want contractors to abandon projects or for them to become 'sick projects'. Otherwise, it may incur higher costs to appoint new contractors to complete the work,” he said.

Meanwhile, chief financial officer Desmond Foo said there will be some margin pressure during the ongoing conflict, but the company is continuously mitigating this through prefabrication to save time and labour costs. 

“These are among the measures we are taking. The extent and duration of margin pressure remain uncertain, but as long as projects remain profitable, we will proceed,” he said.

He noted that gross profit margins in the construction sector are likely to be volatile.

“Margins depend on the expected total project cost. As long as we can control costs to complete the project, we can manage profit recognition. However, if margins turn negative, the impact will be reflected in the accounts,” he said.

For the financial year (FY) 2025, Hartanah Kenyalang recorded a gross profit margin of 12.8 per cent. 

The company’s outstanding order book stood at RM563.05 million as at Jan 31, 2026. It secured projects including the Sadong Tourism Project (RM8.97 million), Serikin Immigration Project (RM42.79 million), Sarawak Stadium Project (RM184.32 million), and Sibu Prison Project (RM275.33 million) in the first quarter of FY2026.

As at Jan 31, 2026, the Sarawak tender book stood at RM3.94 billion, comprising 10 projects, with RM1.08 billion from five design-and-build projects. In Peninsular Malaysia, the tender book stood at RM0.43 billion.

Going forward, Desmond said the company is focusing on water projects, as the Sarawak state government is actively implementing initiatives under the Sarawak Water Supply Master Plan and the Sarawak Water Grid System to ensure a sustainable and uninterrupted supply.

Under the 13th Malaysia Plan (13MP), Sarawak has been allocated 44 water and sewerage development projects worth nearly RM6 billion.

“We are targeting pipeline, upgrading and replacement works, as well as water treatment plants. While this is a new area for us, we have undertaken water projects mainly involving elevated tanks, and aim to secure more projects in this segment,” said Desmond.

He added that the company is also eyeing opportunities in renewable energy, as Sarawak positions itself as a renewable energy hub for international investors, supported by resources such as hydro, solar, biomass, natural gas, and hydrogen.

Sarawak aims to achieve 10 gigawatts (GW) of total installed capacity by 2030 and 15 GW by 2035. Under the upcoming Sarawak Energy Transition Policy, renewable sources are expected to account for at least 60 to 70 per cent of generation capacity by 2030.

“Against this backdrop, Hartanah is actively exploring opportunities and has begun tendering for substation projects across Sarawak.

“Substations form part of the electricity distribution network, receiving power from renewable energy producers and delivering it to end users,” he said.

-- BERNAMA