Key Highlights of Handal Resources analyst briefing

Key Highlights of Handal Resources analyst briefing


Handal is one of the only two API-certified offshore crane service provider and fabricator in Malaysia, the other being Favelle Favco.


Likely to secure jobs worth RM350m. Current orderbook stands at RM26.7m which consists of contracts flowover from FY11 that lasts till May 2012. Handal is tendering for another RM444m worth of jobs that could last for 5 years. Out of the RM440m, Handal is likely to secure RM350m for crane maintenance services to ExxonMobil and Petronas Carigali as Handal has served both oil giants for the past 3 contract terms. In the previous term, both contracts were valued at RM250 million for 5 years. Results of the tender will be out in end-May


Growing crane fabrication business. Apart from maintenance and overhaul services, Handal is growing its crane fabrication business, which is still behind Favelle Favco. Handal is operating from 2 yards in Kemaman with combined capacity of 42 cranes a year and has secured 6 crane orders in 1Q12.


Potential catalyst. Handal is also venturing into a new business area - rig fabrication and supply of workover rig. The management has identified the niche of modular rigs for marginal fields with only one local operator currently, Petrodrill (UMW). Currently assembling a rig with RM31.5m capex which is financed by its rights issue. Management is currently marketing the rig to potential clients and looking at a long-term lease at a rate of between RM60,000 to RM80,000 per day.

FY11 results lower due to exceptionally high income in FY10, higher costs, inventory write-down and provision for project losses. As a result, EBITDA margin dropped to 10.9% in FY11 (vs 26.7% in FY10). EBITDA margin is expected to remain pressured at 20% in FY12 due to depreciation costs from the rig fabrication unit. Handal’s management is targeting FY12 revenue of RM95m (vs FY11 RM83.5m)