Friday 29 Mar 2024
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This article first appeared in The Edge Financial Daily on April 12, 2019

KUALA LUMPUR: It is still “tough” for Malaysia Marine and Heavy Engineering Holdings Bhd (MHB) to turn around given the volatile and challenging market, said its chairman Datuk Nasarudin Md Idris.

He explained MHB’s performance is very much dependent on how fast the group could replenish its order book and the flow of work order as some contracts it won are call-off contracts.

That said, MHB is seeing more activities in the first quarter compared with a year ago, according to Nasarudin, adding that the group is seeing more orders in its marine business.

Furthermore, 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 — he said most ship owners have “already taken a stance” on whether they want to dry-dock their ships. In short, this means more business for MHB.

Previously, shipowners had delayed to dry-dock their ships for the installation of the engine cleaning systems to meet the new IMO 2020 requirement as the implementation date was not known yet. IMO 2020 seeks to reduce ships’ sulphur emission to 0.5% from 3.5% of current bunker fuel.

Overall, the total utilisation of the marine unit is more than 75%, he told the media after MAB’s annual general meeting yesterday.

Year-to-date, the group has bid for RM5.9 billion worth of jobs, of which 60% of the works are overseas and the rest local.

The group’s order book stood at RM760 million as at end-2018.

Having been through the challenging and volatile market in recent years, MHB intends to cultivate recurring income stream to diversify its earnings.

Nasarudin said the group does not want to be dependent on only one business segment.

He expects the current financial year ending Dec 31, 2019 (FY19) to be a “better year” than the previous one on the back of its marine segment.

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

Nasarudin noted that these jobs, despite not having “large value”, will provide a steady source of income to help defray the group’s overhead costs.

One notable recurring job is a five-year service contract from its parent company Petroliam Nasional Bhd (Petronas). The value of the contract, which comes with an option for extension, is not specified as it is on a call-off contract basis.

The contract is awarded to a joint venture between MHB’s wholly-owned unit Malaysia Marine and Heavy Engineering Sdn Bhd and Hiap Seng Engineering Ltd. It is a master service agreement for integrated plant turnaround works and daily maintenance work on mechanical static for Petronas’ plants across the group.

MHB’s share price has been climbing steadily since December, rebounding from an all-time low of 49.5 sen to a high of 85.5 sen last month. The stock closed at 81.5 sen yesterday compared with the average target price of 73 sen.

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