TH Heavy Engineering to shift to shipbuilding
TH HEAVY Engineering Bhd (THHE) plans to shift its core business from fabrication to shipbuilding and ship repair in a move to turn around the debt-ridden company.
The offshore and marine engineering services company, also a Practice Note 17 company since April 28 last year, aims to grow the shipbuilding and ship repair segment to more than 50% starting 2019, after its regularisation scheme is fully implemented.
“Fabrication business in the oil and gas industry is very competitive and already reached overcapacity. We would like to move away from it in the local market while growing shipbuilding and ship repair,” CEO Suhaimi Badrul Jamil (picture) said at the company’s EGM in Kuala Lumpur last Thursday.
During the EGM, THHE shareholders approved the novation agreement proposal with Yinson Holdings Bhd for the floating, production, storage, offloading facility (FPSO) job awarded by JX Nippon Oil and Gas Exploration (M) Ltd.
Previously, the company was unable to achieve the original handover date to JX Nippon scheduled on June 30, 2016, due to the inability to complete the conversion works of FPSO Layang Vessel because on its inability to raise the necessary funding.
The physical completion of the FPSO is at 42.92% with an unaudited net book value of the of RM748.4 million.
The shareholders’ approval was the second milestone in its regularisation plan, after being granted haircuts of 50% for unsecured creditors and 32% for secured creditors last December.
Up to RM352.8 million, or 94.% of the RM374 million proceeds from the FPSO job transfer deal will be utilised to pay the creditors.
As at the third quarter ended Sept 30, 2017 (3Q17), the firm’s revenue stood at RM416,000 compared to a loss of RM9.1 million in the 3Q16, derived from manpower supply and minor fabrication for the metering skid.
Net loss contracted to RM32 million from RM131 million for the same period in 2016, due to the exclusion of a oneoff loss on disposal of an associate of RM56.3 million and the reduction of project scope of an ongoing project.
THHE has current liabilities amounting to RM950 million, with short-term borrowings at RM295 million, against cash and cash equivalents of RM19.8 million.
“Upon completion of our (regularisation) scheme, we hope to pare down our borrowings to RM60 million,” Suhaimi said.
The next phase of the company’s scheme includes issuance of new shares, subject to Bursa Malaysia Bhd’s approval.
THHE also plans to dispose off some of its underutilised assets, such as cranes and other equipment, which is expected to raise RM12 million for loan repayments.
Moving forward, for fabrication, the company is moving away from the local market and looking into overseas opportunities in India and the Middle East.
The shipbuilding and ship repair segment will focus on the local market first, while works to transform its fabrication yard in Pulau Indah, Selangor, to become a full-service shipyard is underway.
“Shipbuilding and ship repair will be our main business starting next year,” Suhaimi added.
THHE, 29.81%-owned by Lembaga Tabung Haji, is currently working on its pioneer project on shipbuilding and ship repair to build three units of offshore patrol vessels for the Malaysian Marit ime Enforcement Agency.
Its unit THHE Destini Sdn Bhd, a joint venture between THHE Fabricators Sdn Bhd and Destini Shipbuilding and Engineering Sdn Bhd, had on Jan 19, 2017, accepted a letter of award from the government to supply the vessels with a contract totalling RM739 million.
Last Thursday, THHE’s share price closed unchanged at nine sen, with a market capitalisation of RM100.9 million.
Source: The Malaysian Reserve