Significant changes with higher risk led to Boustead privatisation lapsing, says LTAT

 5 Feb 2021

theedgemarkets.com

KUALA LUMPUR (Feb 5): Uncertainties stemming from Covid-19, the Littoral Combat Ship (LCS) project, leadership changes at Lembaga Tabung Angkatan Tentera (LTAT) and clarity of Boustead Holdings Bhd’s (BHB) rejuvenation plan led to the armed forces fund aborting its takeover plan of Boustead after eight months of consideration.

In a statement, LTAT said that upon the latest deadline to announced a plan to privatise Boustead on Feb 2, a conscious decision was made to allow the deadline to lapse.

It said this was after considering the changing circumstances surrounding the privatisation plan, which presented heightened risk towards ensuring the successful completion of the privatisation.

“We were conscious to do this in the best interest of our key stakeholders, particularly our contributors, the armed forces personnel,” LTAT said.

These changes included potential uncertainties as a result of the prolonged Covid-19 measures that could further delay the diversified conglomerate’s privatisation. Additionally, there were also further uncertainties over the key businesses of Boustead, namely banking, hotel, property and retail petroleum, LTAT explained.

LTAT also highlighted leadership changes on its side and at Boustead, which require sufficient time to review ongoing projects and initiatives.

Moreover, there was also the question of Boustead’s rejuvenation plan, which included a plan to address its debt levels, it highlighted.

As such, LTAT’s current focus is on the execution of its strategic asset allocation (SAA) framework, which was completed towards end-2020. The framework establishes the objective of better diversification of investments in its portfolio, it noted.

LTAT said that it intends to rebalance its portfolio by increasing fixed income instruments (20%), reducing real estate and private equity exposure (10% respectively), and increase the diversification of its public equity portfolio (50%) and the remaining portion in other asset classes, including money market instruments.

The fund also noted that at a later stage, it plans to diversify its investments in the international arena, like other funds in the country.

“While full implementation of the initiatives as part of the strategic transformation plan would take a few years and continues to be a work in progress, LTAT will continue to assess its options in respect of creating value from its existing key investments, including reviewing the merits of any potential value creation exercise, subject to 4/4 commercial viability to LTAT and BHB, within the boundaries of the takeover rules and relevant regulations.

"At this juncture, LTAT will continue to work closely with BHB in terms of providing support towards its 'Rejuvenating Boustead’ plan and future growth strategies,” LTAT noted.

The fund also explained that it had previously engaged in the privatisation of Boustead to protect the value of its investments, as well as to pave the way to support the potential restructuring of Boustead that was being planned.

This, it argued, would help accelerate its own strategic transformation plan, which involves capitalising on immediate high-impact initiatives as catalysts to address immediate gaps and creating value in achieving longer-term sustainability.

To recap, LTAT announced that it was considering taking Boustead private at 80 sen in May. On Feb 2, the fund announced that it was aborting the exercise.

Earnings-wise, for the nine months ended Sept 30, 2020 (9MFY20), Boustead reported a wider net loss of RM153.1 million, compared with RM14.2 million a year prior. Revenue for the nine months was 6.16% higher at RM7.79 billion, compared with RM7.33 billion previously.

As of Sept 30, 2020, its borrowings stood at RM7.7 billion.

Boustead is the main dividend income contributor to LTAT. The conglomerate was financially stressed in recent years and that affected its affordability to declare generous dividends.

Boustead has several listed entities under its belt. It holds a 20.73% stake in Affin Bank Bhd, a 57.42% stake in Boustead Plantations Bhd, a 65% stake in Boustead Heavy Industries Corp Bhd and 56.09% of Pharmaniaga Bhd.

Shares in Boustead were 2.5% or 1.5 sen lower at 58.5 sen as of 11.56am today, translating into a market capitalisation of RM1.19 billion. It had seen 2.28 million shares done.

by Surin Murugiah

LCS - RESPONSE TO THE PATRIOT STATEMENT

US Navy Asks Shipbuilders: Can You Build Us a Warship for Just $100 Million?

Introducing a $100 million (really small) aircraft carrier

As a matter of fact, this is exactly what the Navy is considering doing as part of its Light Amphibious Warship project, first referenced earlier this year. 

As reported by USNI News last month, the Navy and Marine Corps are working with "about six industry teams" to design and build a 200-foot to 400-foot long amphibious warship, displacing anywhere from 1,000 to 8,000 tons. (For comparison, Ford class aircraft carriers are more than 1,100 feet long and displace 100,000 tons, while smaller America-class "mini aircraft carriers" are more than 800 feet long and displace 45,000 tons.)

The Light Amphibious Warship, or LAW, is therefore being envisioned as a much smaller ship -- but this is commensurate to its task. As part of its new "distributed maritime operations" strategy, the Navy wants LAW to carry small units of Marines to capture small islands, launch attacks on enemy naval forces from those islands, and then quickly scoot off to different islands to launch still more attacks before the enemy can respond.

The USN budgeting to build small aircraft carriers called LAW  at USD 100 million each. 

Compare this to our LCS which works out to about RM 2 billion each should it eventually get built. RM 2 billion is USD 500 million each LCS. That would have been 30 LAW vessels for the RMN. We would have been a deep and blue water navy!

In comparison the 4 LMS built in China works out to USD 250 million each which is still expensive but the contract went through BHIC. I think the actual build cost would have been very much less but there again what else is new.

The idea of building naval vessels locally is to save cost and for technology transfer. We are achieving neither.

When BHIC reported lack of talent as one of the reason the failure of LCS build by them, we are wondering if can't the talents be seconded from other galaxies around us?

Talents can be sourced....but will political leadership allows it instead of siphoning money from the projects...we need servant leaders; not self-serving leaders...

And when the Patriot BG Raji trying to put the blames to the user (RMN) for changing the equipment and specification , the previous chief is not happy with the statement. Here some of the respond to the Patriot statement:

1. Usually shipbuilding starts by formulating complete documentation approved by the customer (TLDM) especially the Contract Building Specifications (CBS), Ship Work Breakdown Structure (SWBS), Inspection, Test & Trials Procedures & Protocols in addition to some other documents such as some categories design drawings . All this is customized by the ship equipment outfit designed e.g machineries, weapons and sensors and many more. If all the documentation is ready and ready to go, or has gone half-way, then there is a change in equipment outfit then many complications arise revamping the affected documents and redesign and reworks. Usually, when all the documentation is completed the construction work becomes smooth, in short in the order of Equipment manufacture by OEM, Eqpt FAT / PDI, Eqpt delivery, Eqpt setting-to-work (STW), Eqpt Installation, Eqpt Installation Test, Eqpt HAT, Eqpt Integration, Eqpt / System Integration Test (SIT), Eqpt SAT and Eqpt Final Acceptance Test & Eqpt Commissioning. In analyzing the LCS construction delay, Patriot, as an outsider not privy to these chain of shipbuilding procedures need to be careful in making sweeping statement with regards to the Project and resulting in free-for-all unfounded public comments. Only the RMN Project Team and it's counterpart BNS Project Management Team know the true problems,

2. I was called upon to respond to President Patriot's press release. I do not agree with the statement "Request for change of Weapon system and equipment by TLDM halfway into design and construction was the main contributory factor for the project delay." If true, it did not happen during my time as a PTL. I never asked for a weapon system change after the project started. But I once disputed the selection of Exocet and VL Mica as SSM (Surface to Surface Missile) and SAM (Surface to Air Missile) systems by the Ministry of Finance at the beginning of the system selection phase for this project again. Both systems chosen by the Ministry of Finance are not only considered inferior and outdated, but more expensive than those proposed by the RMN. TLDM has chosen NSM for SSM, and ESSM for SAM. The election by the Ministry of Finance has clearly turned its back on the election and the TLDM proposal. Missile Exocet has been converted to NSM missile but VL Mica is still maintained. For your information, NSM is the SSM system chosen by the US Navy for their new ship project, while the current VL Mica System is considered obsolete! For your information, all documents regarding this matter are stored in duplicate in a special file and archived. I have met 4 times with the PM at that time to raise the TLDM's disagreement in the selection of the two systems since the beginning of the project, not halfway into design and construction

From the PVTLDM brainstorming

BHIC’s unit forms JV company with Swiss firm

Boustead Heavy Industries Corp Bhd’s (BHIC) fully owned unit BHIC Defence Technologies Sdn Bhd (BHICDT) has signed an agreement with Switzerland based RD Investment AG (RDI) to form a joint-venture (JV) company in Malaysia.

The agreement is part of a plan to restructure and rebrand their businesses into one entity named Contraves Advanced Devices Sdn Bhd (CAD).

CAD will implement the contracts awarded to BHICDT and RDI, under the Royal Malaysian Navy Littoral Combat Ships Programme for combat system-related infrastructure and services.

BHICDT and RDI agree that the initial issued and paid-up capital of CAD will be RM1 million only, represented by one million ordinary shares of which 510,000 will be allotted to BHICDT and 490,000 shares will be allotted to RDI.

Malaysia Reserve

Thursday, August 17th, 2017 at , News

Boustead in new JV with defence firm Rheinmetall AG

BY M. HAFIDZ MAHPAR

Boustead's concept model of a second generation patrol vessel.

KUALA LUMPUR: Boustead Heavy Industries Corp Bhd (BHIC) and German defence firm Rheinmetall AG plan to set up a new joint venture (JV) engaged in project management, contract administration and related services for the Malaysian defence industry.

BHIC told Bursa Malaysia that its wholly owned sub-subsidiary BHIC Defence Technologies Sdn Bhd (BHICDT) would hold a 60% stake in the JV company while Rheinmetall Air Defence AG’s unit RD Investment AG (RDI) will own the rest.

BHIC’s previous JV with Rheinmetall Air Defence - Contraves Advanced Devices Sdn Bhd (CAD) - is an electronic systems manufacturing and service company.

In April 2013, CAD was awarded 10-year, RM514.99mil contracts to supply towed array sonar and surveillance radar for the Royal Malaysian Navy’s six second generation patrol vessels or littoral combat ships (LCS).

In September that year, Rheinmetall Air Defence transferred all of its 49% equity in CAD to its wholly owned subsidiary, RDI.

Under a share and business restructuring agreement, BHIC and Rheinmetall agreed that BHICDT would have management and leadership for the LCS combat system equipment procurement and integration business (with the exemption of certain specific business affairs). The parties agreed to form a new JV company for this.

RDI, via CAD, will retain the management and leadership of the electronic and additive manufacturing, integration and training services business for defence, industrial and aerospace markets.

CAD will continue to implement the contracts awarded to them under the Royal Malaysian Navy LCS programme, namely providing the fire control system and combat management system.

The new JV company, meanwhile, will handle the LCS programme’s transfer of technology obligations to be fulfilled by DCNS SA, France, which is the design authority for the LCS as well as the combat management system.

The business of the JV company would be conducted in its best interests in accordance with good and sound commercial profit-making principles, BHIC said.

“The board believes that the investment will strengthen BHIC Group’s existing relationship with RDI, which may open up other future potential business collaborations, on a win-win basis for both companies particularly in the Malaysian defence industry,” BHIC said.

BHIC ties up with RD Investment to incorporate new JV company

KUALA LUMPUR (Aug 16): Boustead Heavy Industries Corp Bhd (BHIC), via its sub-subsidiary, BHIC Defence Technologies Sdn Bhd (BHICDT) today signed a joint venture agreement with Swiss-based RD Investment AG (RDI) to form a joint venture company(JVCo) in Malaysia.

According to a Bursa Malaysia filing today, RDI, a subsidiary of Rheinmetall Air Defence AG (RAD), will be responsible for the management of the electronics and additive manufacturing, integration and training services business for defence, industrial and aerospace markets.

BHICDT will be responsible for the management of the Littoral Combat Ship combat system equipment procurement and integration business of the newly formed company.

In 2010, BHICDT had entered a JV agreement with RAD for the purpose of regulating its JV company then known as Contraves Advanced Devices Sdn Bhd (CAD).

By an agreement dated Nov 5 2012 between RAD and RDI, RAD had agreed to transfer all of its 49% equity in CAD to its wholly-owned subsidiary, RDI.

The change of shareholding for CAD from RAD to RDI was effected on Sept 23 2013.

The parties had on July 10 2017 signed a Share and Business Restructuring Agreement (SBRA) to restructure and rebrand their business activities. Pursuant to the SBRA, the parties agreed that RDI shall have within CAD the management and leadership of the electronics and additive manufacturing, integration and training services business for defence, industrial and aerospace markets.

Additionaly, BHICDT shall have management and leadership of the Littoral Combat Ship combat system equipment procurement and integration business (with the exemption of certain specific business affairs as set out in the SBRA) for which the parties had agreed to jointly incorporate a new JVCo.

CAD will continue to implement the contracts awarded to them under the Royal Malaysian Navy Littoral Combat Ships Programme for the provision of the Rheinmetall Fire Control System and provision of the Combat Management System together with combat system-related infrastructure and services.

The new JVco will have a paid-up capital of RM1 million, in which after 60 days of incorporation, BHICDT will hold 60% of the shares and RDI, 40%.

The main business activity for CAD will surround the defence industry in Malaysia, such as the remaining Littoral Combat Ship, Combat System Equipment and Combat Management System procurement, Combat System Engineering and Combat System Integration activities.

Besides that, CAD will also be the recipient of the Littoral Combat Ship Programme Transfer of Technology with French naval design company, DCNS SA.

BHIC expects that the JVco will contribute positively to the earnings of the group by the end of this year.

"The Board believes that the investment will strengthen BHIC Group existing relationship with RDI, which may open up other potential business collaborations, on a win-win basis for both companies particularly in the Malaysian defence industry," it added.

Emir Zainul

/

theedgemarkets.com

August 16, 2017 19:32 pm MYT

BHIC to continue improving operational efficiency

The Star Online
Thursday, 6 April 2017

PETALING JAYA: Following its turnaround last year, Boustead Heavy Industries Corp Bhd (BHIC) will continue to improve its operational efficiency to enhance profitability, going forward.

The focus, its chairman Tan Sri Lodin Wok Kamaruddin said, was to strengthen its shipbuilding capabilities.

“Currently, our order book stands at RM7.5bil, inclusive of our associate company Boustead Naval Shipyard Sdn Bhd. We have made the effort to further improve our shipbuilding capabilities to cater to the requirement of the Royal Malaysian Navy (RMN).

“We are aware that the RMN wants to reduce its classes of ships to five from 15 and we have taken into consideration its new plan and strategy.

“We are also re-aligning our own operations to focus more on shipbuilding compared to maintenance, repair and overhaul works,” said Lodin after the company’s AGM yesterday.

The five classes are new generation patrol vessels (NGPV), littoral combat ships (LCS), submarines, littoral mission ships (LMS) and multi-support ships.

Managing director Tan Sri Ahmad Ramli Mohd Nor said the company had benefitted from its earlier projects that included six NGPVs that have been delivered, an ongoing LCS project and the most recent LMS contract that would see technology transfer from China.

“We are equipped with enough expertise to be confident enough to offer our own design and construction. Of course, we will work with other parties that are favoured by the Government.

“We will also continue to reduce our operational costs to offer competitive pricing to interested parties in the region

“Importantly, we also have a contract under the privatisation agreement with the Government to build 27 ships at Boustead Naval Shipyard.“So far, we have got orders for 12 ships that will keep us busy for some years,” he said.

On March 23, Boustead Naval Shipyard inked an RM1.17bil contract from the Government to build four units of LMS for the RMN. BHIC will team up with a partner shipyard in China to supply the ships.

Boustead Naval Shipyard is a company specialising in defence shipbuilding and ship repair and maintenance activities. It was reported that the first two ships will be built and delivered in China in 2019 and 2020, respectively, while the remaining two will be built at Boustead Naval Shipyard in Lumut, Perak, and will be delivered in 2021.

In 2016, BHIC returned to the black with earnings of RM76.69mil compared with a net loss of RM30.74mil in 2015, while its revenue increased 15.7% to RM307.52mil from RM265.64mil.

The company also declared an interim single-tier dividend of three sen per share for the financial year ending Dec 31, 2017, which was paid on March 30.

The focus, its chairman Tan Sri Lodin Wok Kamaruddin said, was to strengthen its shipbuilding capabilities.

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Boustead gives out vessel job worth RM203.8m

Boustead gives out vessel job worth RM203.8m

October 02, 2012

KUALA LUMPUR, Oct 2 – Boustead Holdings Bhd’s unit, Boustead Naval Shipyard Sdn Bhd (BNS), has issued a letter of award (LOA) to Contraves Advanced Devices Sdn Bhd (CAD), in relation to the RM203.79 million contract for Second Generation Patrol Vessels/Littoral Combat Ships.
CAD is a subsidiary of Boustead Heavy Industries Corp (BHIC).
The LOA covers an implementation period of up to 10 years.
“The commencement date of the awarded works is Oct 2, 2012,” said Boustead Holdings in a filing to Bursa Malaysia today.
The company added that the LOA awards to CAD, a contract to procure, engineer, and integrate into the DCNS SETIS Combat Management System, a Combined Integrated Communication System and Communications ESM system.
The awarded works are expected to have a positive impact on the earnings of the company for the financial year ending Dec. 31, 2012 and subsequent financial years, as the tenure of the awarded works is long term in nature. – Bernama

BTIMES
Contraves wins combat vessel job
Boustead Holdings Bhd's unit, Boustead Naval Shipyard Sdn Bhd (BNS), has issued a letter of award (LOA) to Contraves
Advanced Devices Sdn Bhd (CAD), in relation to the RM203.79 million contract for Second Generation Patrol Vessels/Littoral Combat Ships.
CAD is a subsidiary of Boustead Heavy Industries Corp (BHIC). The LOA covers an implementation period of up to 10 years.
"The commencement date of the awarded works is Oct 2, 2012," said Boustead Holdings in a filing to Bursa Malaysia today.
The company added that the LOA awards to CAD, a contract to procure, engineer, and integrate into the DCNS SETIS Combat Management System, a Combined Integrated Communication System and Communications ESM system.
The awarded works are expected to have a positive impact on the earnings of the company for the financial year ending Dec. 31, 2012 and subsequent financial years, as the tenure of the awarded works is long term in nature. -- Bernama