KUALA LUMPUR (April 11): After a disappointing performance last year due to the volatile and challenging market, Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) is looking for more steady recurring income.

Speaking to reporters after its annual general meeting here today, its chairman Datuk Nasarudin Md Idris said the group does not want to be dependent on one segment of the business.

"We are now looking at turnaround services on onshore plants, long-term agreement for fabrication of offshore facilities, and also looking into maintenance services for offshore," he added.

He noted that these jobs will provide a steady source of income that will help to defray its overhead costs, despite not having "large value".

One notable recurring job is the service agreement contract from Petroliam Nasional Bhd (Petronas), which its wholly-owned unit Malaysia Marine and Heavy Engineering Sdn Bhd (MMHE) bagged yesterday.

MHHE, in a joint venture agreement with Hiap Seng Engineering Ltd, was awarded a master service agreement for integrated plant turnaround works and daily maintenance work on mechanical static for Petronas' plants across the group.

The contract duration is five years, with an option for Petronas to extend it.

However, the contract value was not disclosed.

Additionally, he said this financial year ending Dec 31, 2019 (FY19) will be a "better year" than the previous one on the back of its marine segment.

Its managing director and chief executive officer Wan Mashitah Wan Abdullah Sani explained that MHB is seeing positive activity in the first quarter of this year compared to a year ago, adding that the group is seeing more orders from this marine business.

Also, with clarity on the impending implementation of the fuel sulphur cap policy required by the International Maritime Organisation (IMO) — which will take effect by January next year — she said most ship owners have "already taken a stance" on whether they want to dry-dock their ships.

Overall, the total utilisation of the marine unit is more than 75%, she said.

But, when asked if the company could see a turnaround this year, Nasarudin opined that it is still "tough", given the very volatile and challenging market now.

He explained it also depends on when the orderbook or the project materialises.

For the full year of FY18, the Petronas-owned entity posted the second largest annual net loss of RM122.69 million or 7.7 sen per share, after the net loss of RM134.3 million in FY16.

Annual revenue was up marginally to RM974.35 million in FY18 from RM956.41 million the year before. It posted an annual net profit of RM34.23 million in FY17.

For FY18, MHB saw a net loss of RM122.69 million or 7.7 sen a share, versus a net profit of RM34.23 million or 2.1 sen a share in the previous year.

Notably, MHB has reported an operating loss of RM126.19 million in FY18. Its marine segment saw an operating loss of RM81.7 million versus an operating profit of RM52.8 million in FY17.

Its heavy engineering segment registered a higher operating loss of RM39 million, from RM36.7 million loss in the prior year, due to the closeout of completed projects in the previous year.

Also, the company has set aside about RM150 million to RM200 million on capital expenditure (capex) this year to build its new Dry Dock 3 facility.

As at the end of February this year, the construction of the Dry Dock 3 is about 60% completed, said Nasarudin, adding that this dry dock is on track to be completed by May 2020.

The capex allocated this year includes part of the RM520 million allocated to build this new dry dock facility, some RM150 million of which were used last year.

The capex will be funded largely by bank borrowings.

At 2.38pm, the counter was up 1.5 sen or 1.88% to 81.5 sen, valuing it at RM1.3 billion.