This article first appeared in Corporate, The Edge Malaysia Weekly, on July 18 - 24, 2016.

ON July 6 this year, the tender documents for the proposed US$3.2 billion (RM12.65 billion) Bangkok monorail system were issued. Local outfit Scomi Engineering Bhd (SEB), which is looking to play a key role in the infrastructure development project, hopes to finalise its partners by the end of this month and participate in the job, likely through a public-private partnership (PPP).

“For the last six to eight months, we have been talking to local and international parties to work together for this project. We are very excited about the project, our team is there … we have done no less than 15 presentations for various parties in Thailand.

“The competitors are the same — Bombardier, Hitachi and the Chinese [monorail companies],” SEB CEO Rohaida Ali Badaruddin tells The Edge in an exclusive interview.

“There are two lines — Pink and Yellow. By the end of this month, we will know who we will be working with. We have to submit [our tender] by end-August. The award [of the project] will take about four to six months … so, it will be awarded early next year.

“In any rail project, you can bid at the PPP level, [as a] rolling stock supplier or …  in the sub systems, the components — there are many tiers we can participate in,” she adds.

The Pink line, which is slated to connect Khai Rai to Minburi and span 34.5km, is forecast to cost US$1.62 billion (RM6.41 billion) to construct. The Yellow line — linking Ladprao to Samrong at a rail length of 30km — is estimated to cost US$1.56 billion (RM6.17 billion).

Government agency Mass Rapid Transit Authority of Thailand is understood to have approved in principle the two monorail lines at end-February this year and obtained Cabinet approval at end-March.

According to news reports, the Thai government is willing to pay for land expropriation and provide funding for the civil engineering works, while the rest will be financed by the private sector under a 30-year PPP concession.

“So, we’ve been talking to various PPP players that will be bidding,” says Rohaida.

If SEB manages to secure the contract, it will be the third overseas country it operates in.

In November 2008, SEB and Larsen & Toubro, its Indian partner, were awarded Phase 1 of the Mumbai Monorail Project. Costing some US$420 million back then, the line spans 8.92km and links Jacob Circle to Chembur.

Project works started in early 2009. The monorail began operations in February 2014 and has ferried more than 13.1 million passengers to date.

Phase 2 of the Mumbai Monorail Project — which is expected to span 10.76km and cost US$600 million, linking Wadala Depot to Jacob Circle — is forecast to have a higher ridership than Phase 1 and is likely to be completed next year.

In 2011, SEB, with partners Andrade Gutierrez SA, CR Almeida SA Engenharia de Obras and Montagens e Projetos Especiais SA, clinched a RM2.6 billion contract to build the Line 17-Gold monorail line in Sao Paulo, Brazil. SEB is now understood to be undertaking this project alone after its partners pulled out.

It also recently secured additional work, valued at RM504.6 million, for the same line.

SEB’s second monorail project in Brazil was secured in January 2012 when it won the bid for a 20km monorail line for the city of Manaus. It is partnering CR Almeida, Mendes Junior Trading e Engenharia SA and Serveng-Civilsan SA Empresas Associadas De Engenharia in a contract valued at RM2.56 billion.

In July 2014, a consortium that SEB is a part of was awarded a RM5.9 billion contract by Companhia do Metropolitano in Sao Paulo to develop and maintain the city’s Line 18 monorail project — the Malaysian company’s third contract win in the country.

While SEB has secured large-scale contracts, its financials have yet to see the results. The company has an order book of about RM3 billion and tender book of about RM15 billion.

Since 2010, it has posted losses in all its financial years except FY2015. However, if not for tax credits, that year would have been in the red as well.

For FY2016 ended March, SEB suffered a net loss of RM1.84 million on RM174.55 million in sales.

SEB ended trading last Friday at 23 sen, giving the company a market capitalisation of RM78.7 million. It is 72.33% controlled by oil and gas outfit Scomi Group Bhd. 

‘O&M jobs will give us recurring income’

Scomi Engineering Bhd (SEB) CEO Rohaida Ali Badaruddin was appointed to the top position in the company in mid-February this year. She shares her perspective on SEB in an exclusive interview with The Edge. Below are excerpts of the interview.

The Edge: One thing I have wondered for some time now is, why has SEB been overlooked in local rail jobs? Could it be because the company has not performed financially, despite all these contracts?

Rohaida Ali Badaruddin: When you bid for a project, it is based on your technical capability. Of course the company’s standing is important, but so far, we have not been disqualified because of this reason. Our balance sheet should be sufficient to support the project, and in any project, we raise project funding specifically for the project. And that is ring-fenced for the project.

As a project company, the difficulty is that projects are quite lumpy, so earnings are lumpy as well. So, what we are doing now is to complement [the projects] with operations and maintenance (O&M) [jobs], which will give us recurring income.

We hear of large projects in India and in Brazil. It’s exciting but then, there’s the missing part — the earnings and share price. What is the problem?

The problem is that the projects are delayed, and today, we have Mumbai, KL and Brazil. I guess on the brighter side, we have additional projects in Brazil — Sao Paulo, Line 17, which is an additional RM500 million ­— so that should kick off very soon. There’s also Line 18, which should also kick off quite soon. When these two happen, it will take us to a different dimension altogether in terms of financials and, hopefully, share performance, which is actually out of our control.

You’re saying you have O&M jobs. When will they kick in?

O&M is actually one of our initiatives to have a recurring business. We are now putting [in] a proposal for the continuation of an O&M project — the Mumbai project. The Mumbai project, we have been operating since 2014, and it’s for three years, expiring in February 2017.

Naturally, they would like us to continue with the O&M, but they have to tender it out. Basically, we are the incumbents [so we stand a good chance].

We are also participating, putting a bid, putting a participation agreement for Line 18 — the maintenance part of it. We are already finalising the agreement for the maintenance part of the contract, apart from supplying the rolling stocks in Line 18.

Our competitors, Bombardier and Hitachi, do not do O&M. So far, the O&M has always been done by a separate company — the designer, builder or manufacturer.

Do you have a time frame for when all this will impact your bottom line?

We are already one foot in. For example, in the monorail business, we have already been doing O&M for the last few years in Mumbai and now, we are signing the Line 18 contract, which means that we are already there in terms of the actual execution or actual operations itself. So, I think it will happen in the next 12 months.

Every now and then, we hear that a stake in SEB will be sold to a foreign company. Will that change anything?

Capital injection will definitely bring life to SEB for us to spend more on capex (capital expenditure), but I can’t answer that. You’ll have to ask them (Scomi Group Bhd).

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