By Emmanuel Samarathisa
BOUSTEAD Heavy Industries Corporation Bhd (BHIC) is in the lead to win a RM220 mil contract to build 18 fast interceptor crafts (FICs) for the Royal Malaysian Navy (RMN), say people with knowledge of the matter.
“The contract should be awarded to BHIC. The company still stands in good stead among RMN officials. It belongs to armed forces fund Lembaga Tabung Angkatan Tentera. BHIC is also the only company that has experience building and delivering combat-type ships, including FICs,” says one of the sources.
FICs are high-speed boats designed for patrol and rescue operations. The contract will see the production of vessels to be deployed to Sabah’s eastern coast to curb intrusions.
BHIC, through its subsidiary BYO Marine Sdn Bhd, had successfully built and delivered 10 FICs to the Malaysian Maritime Enforcement Agency (MMEA). That contract, worth RM130.7 mil, was completed in 2012.
The Edge, in its Dec 9-17 issue and quoting sources, listed four companies that had submitted bids to construct and deliver the FICs. They are BHIC, Destini Bhd, Muhibbah Engineering (M) Bhd and TH Heavy Engineering Bhd.
But it is understood that many of these names fall short in terms of building combat ships. The only exception is Destini which, together with THHE Fabricators Sdn Bhd, is currently constructing three 83m offshore patrol vessels (OPVs) for MMEA. THHE Fabricators is a subsidiary of TH Heavy Engineering.
“Also, you have to factor that only BHIC has a well-equipped yard for such matters,” the source says referring to Boustead Naval Shipyard Sdn Bhd. “Even Destini has to use its partner’s (THHE Fabricators) yard to work on the OPVs.”
Last year, BHIC ran into problems due to cost overruns for the littoral combat ship (LCS) programme, leading the company to post its worst net loss in six years.
For the financial year ended Dec 31, 2018, BHIC posted a net loss of RM108 mil on revenue of RM169 mil. According to BHIC, its associates in the defence and security segments bled RM53 mil in red ink, therefore dragging group earnings.
“The loss was mainly attributed to the revision of costs of the LCS programme arising from variation orders and a higher project finance cost,” BHIC said in its 2018 annual report.
BHIC doled out a dividend of 1.5 sen per share, or a total of RM3.73 mil, for FY18 compared to 5 sen per share, or a total of RM12.42 mil, for the previous financial year.
But, BHIC is expected to recover its cost overruns for the LCS programme after it had received a letter from the Ministry of Defence in October that the variation order would be honoured.
The government would spend an additional RM1.4 bil for the LCS after having paid RM6 bil, Defence Minister Mohamad Sabu told the press on Oct 30.
Market observers believe this recovery in costs would drive up BHIC’s earnings. The company is already in the black albeit posting a skinnier net profit of RM3.2 mil for the third quarter ended Sept 30 compared to RM11.86 mil for the same period last year.
Shareholders are also expecting a bumper dividend for FY19 once the RM1.4 bil is realised. BHIC’s share price closed unchanged at RM1.23 on Dec 30. – Dec 30, 2019
