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Saturday January 2, 2010

Mumbai debut for Scomi rail car

THE Malaysian-made rail car will make its debut on the 19.5km Mumbai monorail track in mid-year, with Scomi Engineering Bhd (Scomi Eng) shipping the first car to India today.

This is the first time that rail cars manufactured by the company are going overseas, but the real test is whether the delivery to India will lead to a stream of overseas contracts.

Although a new kid on the block – considering that its chief competitors have been in the business for decades – Scomi Eng has managed to penetrate a very tight market in India and has put in several more bids for public infrastructure projects elsewhere in India and in other countries such as Vietnam and Brazil.

But can the company continue to gain ground in the highly competitive international arena or will its sojourn in Mumbai turn out to be a false start? It is a key question, given that it failed to secure the Penang monorail project.

In an interview with StarBizWeek, Scomi Eng’s newly appointed president, Syahrunizam Samsudin, expresses confidence that the Mumbai monorail contract is the beginning of a new chapter in its public transportation business.

This is the first time that rail cars manufactured by Scomi Engineering are going overseas.

“We are pursuing projects in countries where public infrastructure spending is increasing. We are in the business of providing buses, special purpose vehicles, monorail coaches, and we are now even more confident of penetrating the LRT (light rail transit) car business, for which we have the expertise and knowhow,’’ he says in his first interview since his appointment. The company has identified several target markets – Malaysia, Indonesia, the Gulf countries (including Egypt), India and Brazil. In these core areas, it has teamed up with reputable partners and has set up offices.

For its foray into Mumbai, its Indian partner is Larsen and Toubro Ltd, which clinched the RM1.85bil monorail project. Scomi’s portion of the contract is about RM785mil or 42% of the total value.

“We should be able to get two more jobs this year,’’ he says, but declines to elaborate. Scomi Eng is vying for projects in many states in India, the Middle East, Lagos in Nigeria and Brazil.

There is a lot to aim for. After all, billions of dollars is invested each year to develop infrastructure. According to Scomi Eng, the total amount for the next two decades can be as much as US$35 trillion.

Of this, Syahrunizam believes the spending in the Gulf region will be about US$300bil, in Asia US$400bil and South America US$171bil. This explains the company’s focus on India, the Middle East and Brazil.

Global market

Syahrunizam Samsudin ... ‘We are pursuing projects in countries where public infrastructure spending is increasing.’

“We believe there is a two- to three-year window for us and other companies in Malaysia to tap into the global infrastructure market before China snaps up the projects at a fraction of the costs of the others,’’ he says.

Scomi Group Bhd, which owns 70% of Scomi Eng, has identified the Brazilian market as a priority for the group’s global expansion. Brazil has allocated about US$13bil for public infrastructure in preparation for hosting of the 2014 Soccer World Cup in Sao Paolo and the 2016 Olympics in Rio de Janeiro.

Scomi Eng has hooked up with CR Almeida SA Enganharia De Obras to bid for monorail projects in Brazil. “Brazil is going to be our landing pad in the South American region,’’ Syahrunizam says.

Scomi Group appointed Hilmi Zaini as country president for Brazil effective Jan 1. Previously chief operating office and chief financial officer of Scomi Eng, Syahrunizam replaced Hilmi as Scomi Eng president.

To remain a player in the very competitive game, innovation is key, and Syahrunizam is well aware of that. He says timely deliveries, quality and innovation will be the major challenges for Scomi Eng going forward.

If Scomi Eng can remain innovative, he adds, it will be able stay in the business for a very long time like its competitors Bombardier and Hitachi.

“We are 5-6 years old, but our competitors have been in the marketplace for decades. However, our technological philosophy is to continue to innovate to compete. For that, we have set up a research and development centre in Malaysia and we use local talent to innovate,’’ he explains.

Although ambitious, Scomi Eng plans to be selective as well. It wants to bag projects in the public transportation business but not just any job.

EPCC deals

It is interested only in EPCC (engineering, procurement, construction and commissioning) deals, in which it gets paid for work done instead of having to fund projects under a PPP (private-public partnership) model.

The cars that will be shipped to India today are from its plant in Rawang, which has the capacity to make 200 rail cars and 250 buses a year. The company has invested RM40mil in the plant and 40% of the components used for the bus and rail production are sourced locally.

A big portion of the rest of the materials and components are supplied by China and India as it is cost-effective.

Scomi Eng plans to set up plants in the countries in which it gets jobs to build rail cars or bus coaches. But this will only be done if the job is big enough and it makes economic sense.

“It is our challenge to build a global footprint and replicate in other countries our expertise for effective execution of projects, as timely deliveries is key in our business,’’ Syahrunizam says.

Scomi Eng has 1,100 employees and is listed on Bursa Malaysia’s main market. Its shares were up 1 sen to close the year at RM1.26 on Thursday.

Syahrunizam remains optimistic that the company will be kept busy for a very long time to come because its rail and bus products are bankable globally.

 
SCOMI :  [Stock Watch]  [News]

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