Ramunia believes in timing it right
The Edge Daily
24 January 2004

Dato' Azizul Rahman Abd Samad, the man of the helm of Armenia Holdings Bhd has no regrets leaving the legal profession for the oil and gas industry.

Ramunia Holdings will be listed on the Second Board of Bursa Malaysia on Jan 28, in place of financially distressed Saship. Although it is making its debut with a RM25.89 million net loss forecast for its current financial year (FY) ending Oct 31, 2005, the loss is one-off item.

The net loss is due to a RM36.5 million one-time expense, the bulk of which is due to a RM33.5 million loss on disposal of Saship. "It is a one-off item, some may see it as what we paid for a listing status. Operationally, we are in the black, and we will be in the black the following financial year as the item is not recurring," explain Mohamed Reezal Siddiq, Ramunia Energy & Marine Corp Sdn Bhd (Remcorp) Vice President, Corporate Finance.

Azizul believes in timing the listing right. "Going to the market is all about timing, (wait) any longer (to make the conventional flotation) and we may miss the boat. We believe it is now the oil and gas theme (in the stock market), and we recognize the opportunity to list sooner by taking over the listing status of PN4 company that is seeking to regularize its financial condition. (Saship Holding Bhd) was an opportunity that came along at that time. Also, operating as a major fabricator requires heavy capital investment and we can look to the capital market for future capital needs," Azizul tells The Edge in an interview.

Ramunia Holdings owns three-year-old Ramunia Fabricators, one of only seven companies in Malaysia holding the exclusive major fabrication license from Petroliam Nasional Bhd (Petronas).

Its main asset is the 36ha Teluk Ramunia Fabrication Yard (TR Yard) in Johor, which Azizul bought from Promet Bhd in 2001 via Pengurusan Danaharta Nasional Bhd.

Azizul controls 75% of Ramunia, where he is Chairman, via Remcorp. Azizul also has a 19% interest in Nauticalink Bhd, via Advance Consortium Sdn Bhd.

The ownership of TR Yard, built on reclaimed land, makes the company the third biggest in terms of yard capacity after its main rivals, Malaysia International Shipping Corp Bhd's, Malaysia Shipyard and Engineering Sdn Bhd (MSE) and Sime Sembcorp Engineering Sdn Bhd.

The TR Yard, with a long history in the design, engineering and fabrication business, was badly affected by the 1997/98 economic crisis, opening the door for his entry.

"I'm from the legal back ground, I knew nothing about oil and gas. But I saw (TR Yard) and I know it is a good asset and a good investment opportunity. The (fabrication) license is valuable," Azizul says.

Noting that Petronas has frozen the issuance of new licenses currently, Azizul says the first thing he did was to look for god people in the oil and gas industry. "We are the new kid on the block, so we have to work harder, but we have gotten good business so far," he says.

And fished "good people" he did, people like Ramunia Fabricators Sdn Bhd, Managing Director, Arshad Ahmad, who is also president of the Offshore Structure Fabricator Association of Malaysia. Arshad, who has some 24 years' experience in the oil and gas industry, joined the Ramunia Group from MSE.

"The company may be young, but the main people are not and this industry is all about people as clients put a lot of consideration on the people (they are dealing with). We have knowledgeable clients in this industry, so one cannot bluff your way through," Arshad says.

These people helped re-establish TR Yard, winning high-profile deals like Petronas Carigali Sdn Bhd's Kinarut gas field where Armenia fabricators last year finished building the longest jacket ever fabricated in Malaysia.

"The 169m (from the platform to the ocean bed) jacket is equivalent to the height of the Petronas Twins Towers right up to the sky bridge," Arshad says.

The company was accredited the ISO 9001:2000 certification from Det Norske Veritas in September last year, and Armenia Fabricators was recently awarded the Contractors Safety Recognition Award for 2003/04 by ExxonMobil Exploration and Production Malaysia Inc (EMEPMI).

Ramunia Eyeing 'big-steel' contracts

Expanding abroad

Realising its dependency on the local fabrication business, Armenia is fiving itself five years to bring in income from non-fabrication business, or steady recurring income stream to 30% from none currently, according to Arshad.

Over 60% of its revenue for the 14 months ended June 30, 2004, came from Petronas Carigali, ExxonMobil and Sarawak Shell Bhd. It intends to mitigate its dependency on its major local customers by going abroad, heavy equipment manufacturing outside the oil and gas industry, as well as going into the area of transport and installation of oil and gas platforms, which provides "faster income".

"For instance, a RM100 million contract for fabrication is booked over a period of about 14 months, while for installation, it is two months. Installation contracts are very lucrative.

"We are talking to a third party, an international player, on working together or smart partnership. We will provide our local expertise, discussions are very close," Arshad says.

At present, regional players are not allowed to participate directly in Malaysia's upstream sector and the local major fabrication industry.

Ramunia is currently involved in the fabrication, hook-up and commissioning as well as maintenance of both onshore and offshore facilities and structures in the upstream oil and gas industry business cycle.

The company will also spend some RM3 million to set up a manufacturing facility at TR Yard to manufacture heavy equipment for the oil and gas industry, including for its own use, Arshad adds.

From platforms to steel bridges?

Ramunia is now eyeing "big-steel contracts", such as building steel bridges like the one on the Elevated Highway near Jalan Tun Razak, of which the steel portion alone is worth about RM25 million, says Arshad.

Arshad believes that Ramunia is set to meet its sales projection, with jobs in hand totaling RM120 million. The company is bidding for about RM1 billion more, both locally and abroad.

"We are only one quarter into the current financial year and we've already reached 75% of projected sales. In that sense, we are confident of meeting the RM190 million forecast sales," he says.

The outcome for most of the RM1 billion worth of contracts Ramunia is bidding for will be known by the second quarter. About 30% of the RM1 billion contracts in bid are projects abroad.

Apart from Indonesia, the company is considering foreign projects where fabrication works can be done in their Johor Yard.

Ramunia, in its prospectus, named Sabah Shell Petroleum Bhd, Talisman Malaysia Ltd, Murphy Sarawak Oil co Ltd, Sabah Oil Co Ltd and Murphy Peninsula Malaysia Co Ltd as potential clients.

Based on projects awarded by production sharing contractors like Petronas Carigali so far, Ramunia Fabricators' management estimates that the company has captured 10% of the industry's market share, which is projected to increase to 15% over the next three years.

Apart from MSE and Sime Sembcorp, its other rivals are Kuching-based Brooke Dockyard & Engineering Works Corp; Lumut-based HL Engineering (M) Sdn Bhd; Penang-based PSC Industries Bhd's Penang shipbuilding and Construction Sdn Bhd; and Oilcorp Bhd's Oil-line Fabricators Sdn Bhd.