Benalec targets regional growth
KUALA LUMPUR: Integrated marine construction firm Benalec Holdings Bhd,
en route to a listing on the local bourse on Jan 17 next year, is gearing up for
regional expansion while looking to increase its strength in Malaysia, said its
group managing director Vincent Leaw Seng Hai at the launch of the company’s
prospectus here yesterday.
Benalec says in its prospectus that, within Malaysia, it will focus on larger-scale
marine construction projects and plans to diversify the geographical locations of
its projects to Penang, in addition to its current jobs centred in Selangor, Johor
and Melaka.
Benalec, the country’s second largest marine construction firm by market share,
is believed to be eyeing the land-reclamation work for the 24km-long Penang
Second Bridge project.
A source said that nothing had been firmed up at present but observed that it
was a “natural progression” for Benalec, since the company had considerable
land-reclamation experience in Malacca.
When asked, Leaw said the company had submitted tenders for five projects in
Malaysia and Singapore.He declined to disclose more details about the tenders.
In his speech at the launch, Leaw said the company expects to see higher demand
for land reclamation work over the coming years.
According to Benalec’s prospectus, 89% of its revenue in FY2010 ended June 30,
was derived from marine construction works in Malaysia while the remaining 11%
was from its ship chartering business in Singapore.
The company’s cost advantages and strengths in its niche business are evident in
its high profit margins, which are in sharp contrast to the thin margins earned by
other companies in the industry. Benalec’s net profit margin hovered between
14.31% and 50.13% from FY2008 to FY2010. Its earnings per share have grown at
a compounded annual rate of 63% over the last three financial years.
In an earlier interview with The Edge Financial Daily, Leaw said Benalec’s cost of
construction was comparatively lower than its construction peers as it incurred only
sand, fuel and labour costs.
Its current customer base includes Malaysia’s federal and state governments,
the Singapore government and private companies that are mainly from the power,
property, construction, travel and leisure, and logistics sectors, he added. After launching the prospectus, Leaw told a press conference that Benalec had set
up its Singapore branch and was in the midst of obtaining the required licenses to
enable it to bid for marine construction contracts there. Currently, Benalec provides
ship chartering services in Singapore to its related company Oceanlec Pte Ltd,
a company controlled by Leaw and several Benalec directors.
In 2008, Oceanlec won a contract from the Singapore government worth S$250
million (RM598.8 million) to supply construction material from Vietnam and Cambodia
for the Tuas View reclamation project in Singapore.Benalec is also looking to expand
to Indonesia and Vietnam in the next two to three years via joint-ventures with local
companies for marine construction jobs, Leaw said.
When contacted, an analyst said, the more tangible route for regional expansion for
Benalec would be via Singapore. “If they can get jobs in Singapore, it will be a
testament to their abilities. Singapore will be a springboard for them. Good markets
for land reclamation are countries like Macau, Japan, Hong Kong and Singapore,”
said the analyst at a local research house.
The analyst also noted that one of Benalec’s advantages is its low cost base, making
it an attractive contender for projects.
Established in 1960 as an earthworks and general contractor, Benalec has since
moved into providing marine construction services, such as land reclamation, dredging,
marine piling as well as vessel chartering, support services, shipbuilding and
refurbishment.
Moving forward, Benalec also plans to expand its marine transportation segment
by pursuing large contracts for the transportation of construction materials from
Vietnam and/or Myanmar to Singapore in FY2011 ending June 30. It is also targeting contracts for the transportation of construction materials in the
Middle East and diversifying into oil and gas offshore transportation to provide long-term
anchor-handling tug supply (AHTS) charter services to key players in the O&G sector.
Benalec is also preparing to grow its shipbuilding business by expanding its shipyard
near Port Klang to undertake the building, repair and maintenance of larger ships.
Benalec, said it currently has RM855.7 million worth of contracts in hand with a total
unbilled amount of RM664.1 million with expected completion up to 2016.
The largest project in its order book is an unbilled RM468 million contract for reclamation
and shore project works for 720 acres in Klebang, Melaka. The project is expected to
kick off in 2011, with completion targeted in 2016. Benalec, headed for a listing on Bursa Malaysia’s Main Market, is offering 100 million
new shares of 25 sen each at an issue price of RM1 each. Of the 100 million new shares,
36.5 million will go to the public spread, 6.5 million to its employee share option
scheme and 57 million for private placement.
Benalec is also offering 130 million existing shares of which 73 million is for approved bumiputera investors and 57 million for private placement. Upon listing, Benalec’s
paid-up share capital will be RM730 million.
The company is expecting to raise RM100 million from the IPO, 90% of which will be
used to finance two ongoing projects in Melaka, and another project, also in Melaka,
which is expected to commence next year.
Benalec also said it will allocate RM3.5 million from its IPO’s gross proceeds for working
capital and the remainder to defray listing expenses.
“Our cash and cash equivalent balance will increase to approximately RM109.9 million
after the listing. This will allow us to internally fund our operations without being overly
dependent on external funding, giving us the flexibility to pursue investment and/or joint
venture opportunities in a timely manner,” it said in the prospectus. According to its proforma consolidated results, Benalec’s net profit in its FY2010
ended June 30,tripled to RM58.38 million from RM17.27 million a year ago despite a
3.82% drop in revenue to RM116.48 million from RM120.94 million a year ago.
As at June 30 this year, net earnings per share surged to 9.27 sen from 2.74 sen in
FY2009 while its profit after tax margin rose to 50.12% from 14.28% a year ago. As at June 30 this year, net earnings per share surged to 9.27 sen from 2.74 sen in
FY2009 while its profit after tax margin rose to 50.12% from 14.28% a year ago.
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