MMHE : Pasir Gudang yard hinges on leases extension, earnings

KUALA LUMPUR: Malaysia Marine and Heavy Engineering Holdings Bhd’s (MMHE) acquisition of the Pasir Gudang fabrication yards hinges on the tenure of the land leases extended to 34 years and future potential earnings.

In its reply to queries from Bursa Malaysia Securities Bhd on Monday, Sept 5, it said the acquisition of the yard from RM393.50 million from Sime Darby Engineering Sdn Bhd was based on the future earnings potential earnings to MMHE.

It said this was “based on the assumption that the tenure of the existing land leases has been extended to an unexpired term of 34 years”.

To determine the future potential earnings to MMHE, it summed up the expanded yard capacity would result in economies of scale and flexibility of project bids to secure a larger share of domestic and international contracts.

On the prospects of the Pasir Gudang yard, MMHE said it was closed to MMHE’s existing fabrication yard and it had the infrastructure to support higher-end fabrications.

Upon the expected completion of the acquisition, that is by March 31, 2010, MMHE's yard space would increase from 372 acres to 488 acres. This would position it as the largest fabrication in terms of yard size and capacity.