Eking its place in the ports


  • Smebiz
  • Monday, 08 Apr 2019

More ports: With more ports being built in the region, the company is optimistic about its future growth. — Bloomberg

IN ALL modesty, Syed Sadiq Obaidi Albar frequently shouts out about Usaha Teknikal Sdn Bhd’s achievement in making a name for itself in the port engineering services space.

“We are proud of the fact that a bumiputra company has been able to establish itself as a key player in engineering services in the port business. And we did it on our own,” says the 44-year-old managing director.

The company was founded by Sadiq and sales director Alizi Ismail in 2008 as a pet project. Both were working in a multinational corporation and needed an avenue to look into clients’ requirements which were not served by their employer.

About three years ago, they left full-time employment and started to actively grow the business.

“We saw an opportunity that was not really served in the port industry. For example, what do port operators do when they are short of cranes, or need to refurbish a crane? Then, they’ll need a temporary arrangement.

“So we bought a crane and offered leasing services so that the port can still serve vessels temporarily while making arrangement for a more permanent investment,” explains Alizi.

Usaha Teknikal mainly operates in four key areas: leasing of equipment, refurbishment and maintenance of port equipment, carrying out automation projects, and research and development. The latter two are relatively new segments for the company.

Going into business was a steep learning curve for the duo. Equipment didn’t come cheap. This means heavy upfront investment and possibly a strained cashflow to finance the equipment.

 Rail works: Sadiq (left) and Alizi see the potential to branch out into rail engineering services.
Rail works: Sadiq (left) and Alizi see the potential to branch out into rail engineering services.

Additionally, some equipment take two years to order. So they bought older equipment.

“But we had to make sure that we have the expertise to bring these equipment back to life,” says Sadiq.

Luckily, the banks were supportive.

“That was a critical bit. It was very progressive of the banks (to support us). Otherwise, it would have been a different story. We secured a project, and went to the bank,” recalls Sadiq.

The company got its first contract to lease out a rubber tyred gantry (RTG) crane to Penang Port. And this was the start of its growth story.

Usaha Teknikal moved on from just leasing equipment to refurbishment works. And this is where they see opportunities to expand their expertise.

“These kinds of cranes can last for 25 years. But in eight to 10 years, the control system, the electrical, the system may become obsolete. That’s why there is a strong demand for refurbishment.

“It’s pretty intensive work. After we design the new system and engineering works, we stop the crane for 30-40 days and do the actual work. And you are paying only 20%-30% the cost of a new crane. Some of these cranes cost RM30mil.

“Nowadays, ships are also getting bigger and taller. So port operators also need to heighten the crane to accommodate bigger ships. So there is always a demand for these services,” says Alizi.

 

Next port of call

An opportunity for Usaha Teknikal to expand outside local borders came about two years ago – in Brunei, to be exact.

While it involved equipment leasing at Muara Port, Brunei, there was also an opening for the company to embark on a project that utilises its expertise in equipment refurbishment.

“We initially didn’t want to do those kinds of projects so soon but the opportunity in Brunei just came. And sometimes if you wait, that’s all you end up doing. So we took up the challenge,” Sadiq shares.

But when the company wanted to expand its services there, Sadiq found that local financial institutions were not as supportive of its venture. Regional business was not within their scope, he was told.

With the contract in hand, Usaha Teknikal went ahead and funded the equipment refurbishment project with its own resources, which put a lot of stress on its cashflow.

Fortunately, the company found a lot of favour with its partners and suppliers, which supported them with extended credit terms.

Somehow, the company managed to deliver the project on time.

An example: The company’s refurbishment work in Brunei serves as a testament of its capabilities.
An example: The company’s refurbishment work in Brunei serves as a testament of its capabilities.

“We are proud that we got to manage this internally. Our overseas venture has been good so far. For an engineering company, you would aspire to do projects like this and even more, overseas.

“(Now that it is completed,) we are hungry for more. We can do this and we want to do more. We are engineering guys and our team is excited. They have become very skilled and they are asking us, where to next,” he says.

Its success in Brunei serves as a confidence booster and a case study for Usaha Teknikal as it eyes more projects in the region.

Alizi notes that the local market is rather small in size and the company needs to move beyond to grow. It is currently looking at opportunities in Indonesia and Thailand where the port industry has grown more robust in recent years.

It has taken part in a number of tenders that total up to some RM30mil and Alizi is hopeful it will be able to nab some of them.

Last year, Usaha Teknikal handled projects worth about RM16mil.

Of course, going abroad does add to its challenges given that funding will be difficult as Malaysian banks are not keen on foreign business. Additionally, a lack of local market knowledge may be an obstacle for the company.

Nonetheless, Alizi sees strong demand, particularly for equipment refurbishment, in the region.

Machine-operated: As ports look into automation, there will be less need for human intervention among the containers. — Bloomberg
Machine-operated: As ports look into automation, there will be less need for human intervention among the containers. — Bloomberg

“There’s a need out there. There are a lot of older equipment in the region. That’s where we can come in to increase the lifespan of the equipment. One advantage we have is that we have the expertise at the right price. We have the same technical capability as some European companies but our cost is lower. But we need to work hard to deliver,” he says.

The space is, notably, not short of competition. There is a myriad of small and large firms around to provide engineering services to ports.

However, he says there are no strong players in the field yet, which gives Usaha Teknikal an opportunity to differentiate itself from the rest. And having its own fleet of equipment helps.

At the moment, the company’s asset size stands at about RM10mil.

“If we have good funding, we can grow much faster. We can zoom in on an opportunity knowing that funding will be there. I think a lot of companies going out have that challenge,” says Alizi.

The company also sees potential to expand into rail engineering services as more inland areas require connectivity with ports for businesses to grow.

“The rail business is something we want to grow. The engineering is not far from what we are already doing,” notes Sadiq.

But the big dream for Usaha Teknikal, says Alizi, is to someday become a port operator.

“There are big port operators out there, we can be a small operator.

“We have what it takes. We have the experience and the people. When we have accumulated enough assets, knowledge and experience, we should be able to offer that service,” he says.

With more ports being built in the region, he thinks it is not an impossible dream. Indonesia, for example, has ports of different sizes and could offer it an opportunity to start small.

 

Riding on automation

As with other industries, ports are seeing a growing trend in automation. In Malaysia, it is a rather new area, says Sadiq, but in regions such as the Middle East, Europe and Australia, ports are embracing automation.

“We are doing more R&D to see how we can put our know-how into improving equipment, automate and run more efficiently.”

Eventually, cranes will be operated remotely, he notes, with as little human intervention as possible. This will help reduce costs and improve efficiency at the port.

“Take reefer (refrigerated) containers, for example. When they arrive at the port, they get plugged in and someone goes around every few hours to check the temperature. There are thousands of containers in a port and this is currently done manually,” he says.

Lengthening lifespans: Port equipment needs to be refurbished and upgraded to cater to bigger ships and new systems.
Lengthening lifespans: Port equipment needs to be refurbished and upgraded to cater to bigger ships and new systems.

Automation will enable operators to monitor these containers from afar, help reduce damage to goods and possibly alleviate some disputes and claims should they arise.

Sadiq hopes to be an early mover in the automation space, locally and in the region.

But he acknowledges that reception in the industry has been somewhat lukewarm. There is a looming concern about the cost of technology adoption.

“But technology is becoming more affordable now. And it is the right time now to look into it because of labour shortage and cost pressures,” he says.

“We also hope to develop our own technology. There is more and more technology coming into the market and we will be able to use their platform to develop our own products,” adds Alizi.

The possibilities open to them put them in an optimistic mood. Sadiq believes the company can continue to double in size over the next few years.

“The jobs are there, it is up to us to go out and be competitive. We can’t complain. We just have to keep being hungry,” he says.

 

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