By Emmanuel Samarathisa
BOUSTEAD Holdings Bhd is looking to consolidate its ownership of its naval shipyard business in Lumut, Perak, according to people familiar with the matter.
“Boustead Naval Shipyard Sdn Bhd (BNS) will see a transfer of ownership to BHIC and LTAT, where Boustead Holdings will either reduce its stake in BNS to be a minority shareholder or exit completely and leave it under the care of BHIC and LTAT,” a source tells FocusM, referring to Boustead Heavy Industries Corporation Bhd (BHIC) and armed forces pension fund Lembaga Tabung Angkatan Tentera (LTAT).
If the move happens, Boustead could be an indirect shareholder of BNS as it is a controlling shareholder of BHIC with a 65% stake.
BNS is owned by Boustead (68.85%), Perstim Industries Sdn Bhd (20.77%) and LTAT (10.38%) while the Ministry of Finance has a golden share.
The move to consolidate ownership is understood to help Boustead pare debts. The group’s liabilities stood at RM11.67 bil as of Sept 30 last year. It also registered a net loss of RM155 mil for the quarter under review compared to RM7.3 mil for the same period in 2018. Its cumulative losses stood at RM153.1 mil.
BHIC, which has an indirect stake in BNS through Perstim, considers BNS a principal company since much of its business operations consist of building and maintaining defence ships.
Naturally, BHIC and BNS’ earnings track each other. BNS posted a net loss of RM255.55 mil for the financial year ended Dec 31, 2018, compared to an after-tax profit of RM29.46 mil last year.
BHIC, on the other hand, has been recovering after posting a net loss of RM108 mil on revenue of RM169 mil for the financial year ended Dec 31, 2018. This was due to cost overruns for the littoral combat ship (LCS) programme.
But, according to its latest results, BHIC managed to register a net profit of RM3.27 mil for the third quarter ended Sept 30, 2019 (3Q19) compared to RM11.86 mil for the same period in 2018. Its cumulative earnings as of Sept 30 stood at RM1.91 mil.
Further, BHIC is expected to recover its cost overruns for the LCS programme after it 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.
