KUALA LUMPUR: Boustead Heavy Industries Corp Bhd (BHIC) has secured an extension of its in-service support (ISS) contract from the federal government for two units of Prime Minister’s class submarines for the Royal Malaysian Navy worth RM531.2 million.

In a filing yesterday, BHIC (fundamental: 0.45; valuation: 1.8) said its subsidiary, Boustead DCNS Naval Corp Sdn Bhd (BDNC), received a letter of acceptance from the federal government dated March 3, which approved an additional contract value of the said sum for the extension of the ISS contract period to May 31, 2017. 

The contract was originally to end on Nov 30, 2015.

“The ISS contract will have a material effect on the earnings of BHIC group for the financial year ending Dec 31, 2015, and will contribute positively to its future earnings,” it added.

In a separate statement, BHIC executive deputy chairman and managing director Tan Sri Ahmad Ramli Mohd Nor said the contract would allow the group to continue the maintenance of the two submarines prior to their refit. 

“The first vessel is due to commence its refit by year-end,” he added. 

To recap, BHIC had on Sept 3 last year announced that it had finalised the negotiations with the Malaysian government for the ISS for two submarines for the navy worth RM1.3 billion.

The original letter of award for the contract was received on Aug 13, 2010. The job was secured through joint-venture company BDNC.

BDNC is a 60:40 joint venture between BHIC Defence Technologies Sdn Bhd, a wholly-owned subsidiary of BHIC, and France-based DCNS SA.

BHIC closed unchanged at RM2.18 yesterday, giving it a market capitalisation of RM541.64 million.

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This article first appeared in The Edge Financial Daily, on March 31, 2015.