Friday 29 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on August 30, 2021 - September 5, 2021

ESTABLISHED in 1990 as an oil and gas (O&G) services and equipment company, T7 Global Bhd is now repositioning itself as an energy solutions provider that specialises in the mobile offshore production unit (MOPU) market in a bid to capitalise on companies seeking to reduce their initial capital expenditure exposure and optimise their cash flow.

According to T7 Global chief operating officer Jim Tan Kay Zhuin, the group plans to secure more MOPU projects in the coming years as it intends to become the next big player in this segment of the O&G industry.

“Going forward, we will be looking for more MOPU contracts in Southeast Asia. Currently, we are bidding for two to three MOPU projects in Thailand and Vietnam. Conservatively, we aim to secure at least one new MOPU project every year,” he tells The Edge in a virtual interview.

“We are quite confident of securing new MOPU contracts in the region because these countries have a similar water depth as Malaysia, so they would implement similar offshore concepts. I believe our unique approach and solutions will be the key for us to win more large-scale projects moving forward,” the 32-year-old notes.

He says T7 is upbeat about its build-own-operate concept, such as the MOPU leasing project, given that the majority of operators, including O&G exploration and development companies, are eager to optimise their cash flow. Moreover, the leasing model also provides them with an opportunity to reduce their initial capital expenditure exposure.

Tan first joined T7’s subsidiary, Tanjung Offshore Services Sdn Bhd, in 2016, heading the offshore construction and maintenance segment. He is the son of Tan Sri Tan Kean Soon — who is the executive deputy chairman and major shareholder of T7 — and elder brother of Tan Kay Vin, who sits on the board as executive director.

As at April 2, the Tan family owned an estimated 21.36% equity interest in T7. Other prominent top 30 shareholders include the group’s independent director Tan Sri Richard Koh Kin Lip and Datuk Koon Poh Tat of Press Metal Aluminium Holdings Bhd.

Listed on the Main Market of Bursa Malaysia, T7 is a diversified group involved in the energy, aerospace and defence (A&D), and construction sectors.

Tan acknowledges that the group is currently more inclined towards the energy business, but he hopes to see a more balanced business portfolio in years to come.

Delays in project executions because of the Covid-19 pandemic hurt earnings last year as net profit decreased by 75% to RM3.07 million in financial year ended Dec 31, 2020, from RM12.51 million a year ago.

“We expect to achieve higher revenue and profits in the next few years due to our resilient order book and our strategy to build-own-lease assets. Once our cash flow has stabilised, we will be able to declare dividends regularly or even, perhaps, adopt a dividend policy. We are confident of achieving above 10% growth in revenue and profits next year,” he says.

Year to date, the stock has declined 17%, closing at 36 sen last Wednesday to give the company a market capitalisation of RM221.8 million.

Tan is of the view that T7 is undervalued by investors, as revenue recognition for its MOPU and integrated well services (IWS) contracts has yet to kick in.

“Our group has stable earnings from the O&G division. The future upside will be driven by more MOPU projects in the next few years. We already have the existing expertise and team to pursue opportunities in Southeast Asia, and we are in the midst of bidding for some international projects,” he stresses.

He points out that T7 is a pioneer in providing mobile offshore production facility, with the group securing its first MOPU in 2005, leasing a converted unit to UK-based energy services firm Petrofac Ltd for the Cendor Oilfield Development Project, until it ended in 2014.

“With experience in delivering such assets, we are able to develop a fit-for-purpose mobile offshore production facility to suit various offshore field development requirements. These assets are capable of being deployed and redeployed at multiple locations to unlock the potential of field production,” he explains.

Subsequently, in 2020, T7 secured its second MOPU contract — to engineer and construct a newbuild MOPU, to be leased for a period of 10 years, ending 2032, to Petronas Carigali Sdn Bhd for the Bayan Gas Redevelopment Project Phase 2 in Sarawak.

“The Bayan MOPU project is progressing well. At end-July, we reached our second construction milestone, with the keel laying taking place at a shipyard in Qingdao, China. This project will contribute significantly to T7’s revenue and cash flow, starting from next year. It also represents a substantial share of our RM2 billion order book, along with other long-term operation and maintenance projects,” Tan says.

Thanks to T7’s recent success and track record in the MOPU space, he reveals that the group has been invited to participate in several similar opportunities, not just in Malaysia, but also in the region.

“To us, operator-owned mobile and floating offshore facilities will be an interesting area in the coming years. We are expanding our MOPU project management team to undertake works related to the current job and in anticipation of potentially working on future projects that we have already identified,” Tan says.

T7’s tender book from all business divisions stood at RM3 billion, while most of its order book replenishment came from the energy division.

“Once the pandemic is over, we should be able to see some improvements in the A&D and construction divisions next year. On the tender book, we are currently aiming for another floater project, with the results to be known soon,” he adds.

Positive developments in other divisions

In 2019, T7 ventured into the A&D industries, setting up a metal surface treatment plant in Serendah, Selangor, to conduct secondary processes for metal parts in airplanes before they are assembled into bigger components. The processes include parts treatment, metal coating and painting, non-destructive testing and other chemical processes.

The timing could have been better, though, as the coronavirus has effectively grounded the aerospace industry. This has compelled T7 to explore opportunities to provide metal surface treatment services to other industries, such as automotive and semiconductor.

Lately, there have been signs of a nascent recovery in the aerospace industry. Earlier this month, T7 announced that its 60%-unit, T7 Kilgour Sdn Bhd, had secured multiple purchase orders from two global aerospace parts manufacturers — Taiwan-listed Global Tek Fabrication Co Ltd and Thailand-headquartered CCS Advance Tech Co Ltd — to provide metal surface treatment services for aerospace parts.

While the value of the orders was not revealed, they are expected to contribute positively towards T7’s earnings and net assets for FY2021.

Tan is of the view that T7’s customer diversification strategy has worked well and the results are beginning to be seen, as the group no longer relies solely on local customers.

“These international companies do produce parts for the automotive and semiconductor clients, aside from aerospace clients. Our facility is working hard to fulfil these orders. We aim to expand our offerings in the value chain and secure a diverse set of customers in time to come,” he says.

In early July, the group also announced that it was teaming up with Singapore-based Siemens Logistics Pte Ltd to collaborate on business opportunities in Malaysia, especially in logistics.

In the interim, T7 has been appointed the Malaysian distributor for New Zealand-based Atrax Group NZ Ltd’s weighing and measurement products, which cater to the airport and logistics sectors.

Tan declined to comment on a report by The Edge at end-May that T7, along with MMC Corp Bhd, Fajarbaru Builder Group Bhd and Bina Puri Holdings Bhd, are partnering with multinational corporations to jointly bid for a three-year contract to upgrade the baggage handling system at Kuala Lumpur International Airport.

“Siemens Logistics is our partner for the logistics sector. We will make further announcements when we are able to do so,” he says of the partnership that began in the O&G business.

The group’s construction division is further leveraging this working relationship to collaborate with Siemens to venture into the growing logistics industry in Malaysia by offering innovative infrastructure and building solutions for airports, mail and parcel-handling services, as well as automated solutions.

“Coupled with our agency with Atrax Group in weighing and dimensioning products, we can develop a comprehensive infrastructure solution for the logistics sector,” Tan says.

 

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