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  • Corporate News
  • Saturday, 18 Jan 2020

TH Heavy needs a bigger lift

AFTER more than two years, TH Heavy Engineering Bhd finally got back into the good books of Petroliam Nasional Bhd (Petronas).

In the first week of the year, the company received the Petronas licence that allows it to tender for jobs offered by the national oil company.

However, would it be sufficient to lift the fortunes of TH Heavy? Does it have the execution capabilities to undertake complicated fabrication oil and gas jobs and turn in a profit?

In the last few years, despite getting jobs from Petronas, TH Heavy has had problems with execution. That lead to it being taken out of the approved list of contractors by Petronas in 2017.

TH Heavy is under the PN17 list, which means there are short-comings in its financials and the company needs a regularisation plan. It has another four months to come up with a plan.

The company has a deficit to the tune of RM130mil in its shareholders funds following accumulated losses of RM587mil as of end September last year.

It has cash of RM32mil while debt is more than RM130mil.

Its main shareholder, which used to be Lembaga Tabung Haji, is not likely to be in the mood to put in new money to revive the company.

The assets of Tabung Haji has been placed into a fund called UrusHarta Jamaah that is managed by a separate team. The mandate of UrusHarta Jamaah is to recover as much as possible.

Securing the Petronas licence augurs well for TH Heavy. However, it needs to undertake a fund raising exercise which may need to be anchored on a new shareholder, apart from UrusHarta Jamaah.

The oil and gas industry has picked up from the lows that was seen between mid-2014 to 2016. Many of the companies undertook a fund raising exercise that saw the emergence of new shareholders. Among them is Scomi Group that saw the emergence of Tan Sri Wan Azmi Wan Hamzah.

Hence, would TH Heavy see some new shareholder emerge as the company regularises its financials?

Watch the space!

With PLUS decided, what now for Gamuda highways?

While a decision has been made that highway concessionaire PLUS Malaysia Bhd is to remain with its current shareholders, the outcome of another deal involving tolled highways is still not known.

This is namely the proposed takeover of the Gamuda-related highway concessionaires by the Minister of Finance (MoF Inc).

Both deals were reportedly discussed by the Cabinet on Wednesday, but no decision was made on the proposed takeover of the Gamuda’s tolled assets.

Finance Minister Lim Guan Eng when asked on this yesterday said that there definitely would be an update.

“I’ve said it before I don’t want to make this announcement.Probably we wait for the Prime Minister’s instruction, ” he was reported as saying.

The government has so far been tight-lipped about the deal, which was first proposed in June last year at a total cost of RM6.2bil to be done via the issuance of bonds.

In Budget 2020, Lim said the Cabinet had given its nod for the deal.

Worth noting is that the cut-off date to negotiate and finalise the deal has been extended thrice till Feb 29 this year. It was first supposed to be sealed by Aug 30, then postponed to Oct 31 and later to Dec 31.

What is causing the delay? While the buyout does have its merits, one issue that was raised was on the valuation – that is whether the government is overpaying for these assets.

Such uncertainty is not good, more so if it involves a listed entity as it can have an affect the share price of the stock.

Sime’s costly overseas ventures

A few years ago, Sime Darby group went to China and Africa with a big fanfare. In China, it ventured into owning part of a port while in Liberia it opened up a palm oil plantation with the hope of finding a new frontier.

But 2020 has proven once again why Sime Darby should focus on doing business only within Malaysia.

In China, Sime Darby lost an appeal against a China court ruling to pay a disputed outstanding amount of money to a local contractor for dredging works in Weifang Port in Shandong Province.

Now, Sime would have to fork out its share of the cost amounting to about RM158mil for the case that involves its 37%-owned joint venture company Weifang Port Services Co Ltd (WPS). And this sum could weigh on the group’s bottom line.

According to filings, WPS had recently been ordered by the Qingdao Maritime Court in China to pay the outstanding sum of 711 million yuan (RM427 million) and late payment interest to CCCC Tianjin Dredging Co Ltd.

Tianjin Dredging was engaged to construct a 35,000 deadweight tonne main channel in Weifang.

The project was completed in November 2016 at a total cost of 1.17 billion yuan, of which 741 million yuan remained outstanding. Sime WPS had in August appealed against the court’s decision, to dispute the calculation of late payment interests.

In Liberia, Sime Darby Plantation Bhd’s (SDP) exited from the loss-making oil palm and rubber plantation operations.

The move will bode well for the group as it had never done well in the tough operating environment in Africa.

At least, there would no longer be a unit that would drag SDP’s cash flow and bottom line from now on. And with crude palm oil prices strengthening, SDP is set for sunnier days this year.

However, shouldn’t there be a post mortem on who was responsible for the decision to venture in Liberia when it was well-known that the conditions there are harsh?

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