Benalec in advanced talks

SHAH ALAM: Integrated marine engineering company Benalec Holdings Bhd is currently in advanced talks with at least two foreign oil terminal operators interested in investing in the group's reclaimed land on the southern tip of Johor, said group managing director Datuk Vincent Leaw Seng Hai.

In an exclusive interview with The Edge Financial Daily, Leaw said the group hopes to finalise the preliminary studies for the project in Tanjung Piai by the second half (2H) of 2013.

"On the Johor [Tanjung Piai] project, we have just signed the development agreement [with the Johor government]. Now it is undergoing an EIA [environment impact assessment] and hydraulic studies. So it is ongoing.

"We hope to get the [EIA] approval by 2H next year to start the project," said Leaw, adding that Benalec intends to emulate Singapore's Jurong Island integrated petrochemical development.

In September this year, Benalec had, via two subsidiary companies, entered into development agreements with the state government of Johor to develop 3,485 and 1,760 acres of reclaimed land in Tanjung Piai and Pengerang respectively.

Benalec will undertake the reclamation of land for the project, the development and construction of infrastructure works and find prospective purchasers for the land.

"The Tanjung Piai project is a greenfield project. We plan to develop it into an integrated petroleum hub like Jurong Island. We are going to reclaim and then sell or lease the land to the off-takers [such as oil terminal operators].

"Whereas for Pengerang, it is more to complement the Refinery and Petrochemical integrated Development (Rapid) project, and our target off-takers will be shipyard operators for ship-repairs and ship-building, and also major fabricators for oil and gas. It can be used as a supply base, as well," said Leaw.

The federal government through Petroliam Nasional Bhd (Petronas) is spearheading the RM60 billion oil and gas downstream Rapid project in Pengerang.

The development has attracted several multinational oil and gas and petrochemical companies such as Royal Vopak NV, Versalis, BASF Societas Europaea , PTT Global Chemical, and Itochu Corp to partner Petronas and other local companies such as Dialog Group Bhd.

According to Leaw, Benalec's land reclamation project in Pegerang will include a small dedicated container port to serve the entire Rapid development. However, he said this would not be immediate, considering Rapid is only expected to commence operation by 2016.

"Our main target [for off-takers] is still more on the oil terminal, the ship repair, and fabricators because a lot of major fabrication works will need to be done for the Rapid project," he said.

While reluctant to proclaim the cost of reclaiming both Tanjung Piai and Pengerang, Leaw said that indicative profit margin that the group was looking at is around 20% to 30% from the sale of the land upon reclamation.

Hoy Ken Mak, an analyst with AmResearch, put the value of Benalec's first phase reclamation project in Tanjung Piai — of about 2,000 acres out of a total reclaimable area of 3,485 acres — to be at around RM1.4 billion.

On the group's current land reclamation works in Melaka, Leaw said Benalec still had about 700 acres to be reclaimed, mostly in Klebang with some in Kota Laksamana.

He said the group had another 144 acres of land to be reclaimed in Port Klang, with another 43 acres in various stages of planning. Leaw added that Benalec would be selling around half of its land in Melaka and Port Klang in the next few months.

Currently, the group's reclaimed land in Melaka is being sold at between RM28 to RM35 per sq ft, while its Port Klang reclaimed land is being sold at between RM38 to RM45 psf.

In the first quarter of financial year ending June 30, 2013 (1QFY13), Benalec's net profit shrink by 21.2% to RM22.8 million from RM28.9 million in the corresponding quarter.

This is due to lower revenue of RM57.7 million recorded during the quarter compared with RM74.6 million in the first quarter of last financial year.

However, the group managed to increase it gross profit margin from roughly 52% to 58% during the quarter, while it managed to maintain its net profit margin at around 39%.

Benalec declared 3 sen dividend per share for financial year 2012, up from 2 sen in the previous financial year. The stock ended yesterday at RM1.46 with a market capitalisation of RM1.18 billion.

This story first appeared in The Edge Financial Daily edition of Dec 21, 2012.