TAS Offshore aims to be top shipbuilder in the region

Friday, August 7th, 2009

WITH 28 projects in its order book to build oil and gas vessels, TAS Offshore Bhd aims to be one of the top shipbuilders in South East Asia within a few years.

Having begun as a small supplier of marine coatings and provider of shipping services in 1977, the investment holding company through its 100% subsidiary Tuong Aik Shipyard Sdn Bhd is now an export-oriented shipbuilder, serving international clients in the oil and gas industry from UAE, Bahrain, Indonesia and Singapore.

Founder and group managing director Datuk Lau Nai Hoh says about 90% of its business is mainly for the international oil and gas market. To date, the company has built over 150 vessels of various types and sizes since it started the shipbuilding business in 1991.

“We have the capabilities and expertise to construct a wide range of vessels including tugboats, anchor handling tug, anchor handling tug supply vessels, barges, ferries, workboats and landing crafts, ranging from 23m to 60m in length,” he says in an interview, adding that most of the clients are repeat customers.

“Last year, we handed over 24 units to our clients, ranging from small and big vessels and since June 2008, we have secured nine new contracts for a total of 28 projects in our order book,” he says.

Based in Sungai Bidut in Sibu, Sarawak, TAS Offshore Bhd is currently operating on 12.3 acres shipyard with the capacity to construct an average of 23 vessels per year.

All vessels constructed by the company meet the International Maritime Standards established by recognised classification societies including Bureau Veritas, Nippon Kaiji Kyokai and Germanisher Lloyd.

“Though we do face competition from other international shipbuilders in this region, such as from Indonesia, we have an advantage in lower labour cost in Sibu. Our workforce is 99% local with only a few workers from Indonesia. Given the low labour cost and the good quality of our vessels, we have the competitive advantage,” he says.

The exchange rate has also made the business lucrative, he says, as the vessels are sold in foreign currency.

“We sell our vessels to clients from Singapore in Sing dollar, while for the Middle East, we use US dollars. We have ample cash in hand to secure supplies of key shipbuilding raw materials and components that have long lead times, such as marine engines and generator sets,” he says. He recalls that during the 1997 financial crisis, the company was still resilient although some clients had cancelled their orders. This is because the company had already secured the 30% downpayment in foreign currency which strengthened its cash position.

A week ago, the company launched its prospectus en route to a listing on Bursa Malaysia sometime this month. Deputy managing director Simon Lau Choo Chin says the funds from the listing will be used for working capital and upgrading system facilities.

“We also plan to build, own and sell and/or charter ships after getting the fund for our new business venture. Currently, our modus operandi is to build and sell the ships when the order is in,” he says.

According to him, if the company is able to do this, its profit margin can rise 30%-40% from under 20% using the current business model.

TAS Offshore has managed to chalk up a compounded annual growth rate of 33% per annum in revenue for the past three years.

Its revenue for the last financial year ended May 31, 2008 is about RM121.3mil, with RM16mil net profit. For the first 10 months to March 31 this year, it generated revenue of about RM110mil with net profit of RM15.8mil.

For the initial public offering, TAS Offshore is issuing 77 million new ordinary shares at 90 sen per unit. It is expected to raise total proceeds of RM69.3mil which will be utilised for expansion of existing operations, working capital and listing expenses.

Source: The Star