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Tuesday January 4, 2011

Benalec eyes bigger marine projects

It targets several land reclamation jobs in the country

By LEE KIAN SEONG

PETALING JAYA: Benalec Holdings Bhd, which is headed for a listing on the Bursa Malaysia's Main Market on Jan 17, aims to focus on securing larger marine construction projects.

Besides being an integrated marine construction company, it also provides vessel chartering services.

“We have targetted several land reclamation projects in Selangor, Penang, Johor and Malacca that would require the deployment of a large fleet of vessels.

“We believe that larger scale projects are potentially more profitable and would further enhance our business profile in the marine construction industry,” Benalec group managing director Vincent Leaw told StarBiz.

To secure such projects, he said the company would need to expand the size and capability of its fleet.

It planned to acquire new vessels and equipment to increase its fleet's technical ability, operating efficiency and productivity.

According to Leaw, the company is looking at several sets of tugboats and barges by the end of next year in order to bid for larger projects by 2013.

The company currently has a comprehensive range of 91 vessels to support its marine construction activities and chartering services. “The cost to expand our fleet is estimated at about RM50mil, which we expect to finance it through a combination of internally generated funds and bank borrowings,” he said.

On the outlook for the marine construction industry locally, Leaw said the three states that were most active and have the potential for future marine construction activities were Penang, Malacca and Johor.

Also, the Sarawak Corridor of Renewable Energy and Sabah Development Corridor were the latest development projects yielding potentially high value marine construction projects.

He said the port industry was a key sector with good prospects for the marine construction industry.

The upgrade of waterways and expansion in bulk and cargo terminal capacities in key ports including Butterworth, Tanjung Pelepas, Johor, Port Klang and Tanjung Manis would also yield business opportunities for the group.

The prospects of the marine construction industry in the Asia Pacific region is estimated at more than RM170bil in the next 10 years, according to the Independent Market Research on the marine construction industry by Frost & Sullivan.

The cumulative market size of the marine construction industry in Malaysia for the 2006-2009 was estimated at RM2.87bil.

The industry has been showing an uptrend with compounded annual growth rate at 18.8% during that period.

Benalec's market share, based on construction projects secured between 2006 and 2009, is estimated at 17.9% of the market.

Benalec's initial public offering (IPO) entails a public issue of 100 million new ordinary shares of 25 sen each at an issue price of RM1 each per share payable in full on application.

It comprises 36.5 million shares available for application by the Malaysian public; 6.5 million shares allocated for eligible directors, employees and business associates and its subsidiaries and 57 million shares for private placement to selected investors.

Its offer for sale of 130 million existing shares comprises 57 million shares for private placement to selected investors and 73 million shares for private placement to bumiputra investors approved by the International Trade and Industry Ministry.

AmInvestment Bank is the adviser, sole underwriter and sole placement agent.

Leaw said the listing exercise would boost the company's position in the marine construction industry.

“With the listing exercise, we will be able to strengthen our position in the market and undertake bigger projects.

“The exercise is also an indication of the company's aggressiveness in generating more capital and resources to ensure that the growth momentum continues,” he said.

The IPO exercise is expected to raise RM100mil for Benalec, of which more than 90% will be used as working capital to facilitate its existing operations.

Shah Alam-based Benalec was founded by the late Leaw Eng Chang in 1978, starting out as an earthworks and general contractor.

Since then, the company has ventured into marine construction, and is now in the business of marine construction works, as well as the provision of marine vessel chartering services.

According to its proforma consolidated results, Benalec registered a profit after tax of RM58.4mil for the financial year ended June 30, 2010 (FY10), compared with RM17.3mil in FY09. Its revenue for FY10 was RM116.5mil compared with RM120.9mil a year ago.

Based on its IPO price and enlarged issued and paid-up share capital of 730 million shares, Benalec's market capitalisation upon listing will be about RM730mil.

The group's revenue is primarily generated from marine construction works in Malaysia but it also derives revenue from ship chartering in Singapore.

Its key markets include the development of marine and coastal environment, property development, maritime and logistics, civil works and agriculture in Malaysia.

In FY10, about 89% of its group revenue was derived from marine construction services provided to local clientele while the remaining 11% was derived from ship chartering services provided to Oceanlec in Singapore.

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