Straits set to turn around in FY17
Group sees huge opportunities in its new ship-to-ship bunkering business
PETALING JAYA: An oil bunkering business is being injected into Straits Inter Logistics Bhd, the company formerly known as Raya International Bhd.
The man at the helm is Datuk Seri Ho Kam Choy, 54, who is more comfortable running around in t-shirt and jeans, rather than the spotless white office attire.
Ho, who is based in Hong Kong and spends his days tracking shipping activities throughout the region, was redesignated to managing director on Aug 30 from his previous position of executive director.
Nonetheless, he has been quietly restructuring Straits over the last 18 months.
The restructuring exercise has involved the exit of legacy shareholders and a recent rights issue to raise some RM 21.15mil for its new business – that of ship-to-ship bunkering.
Very simply, bunkering is the business of supplying fuel for use by ships within the port limit and anchorage.
Realistically, Ho acknowledges that shareholders may be sceptical of Straits because of Raya’s past performances.
Raya was previously known as Envair Holdings Bhd, whose major shareholder was Deepak Jaikishan of Carpet Raya Sdn Bhd fame.
In 2012, Deepak emerged in Envair after buying a substantial stake into the air filter company and became its managing director. Subsequently, Deepak had said that he was looking to inject some RM1.5bil worth of oil and gas deals into Envair.
Its share price skyrocketed from the 5-sen level in Sept 2011 to a high of 29 sen within four months.
None of those plans panned out, and not surprisingly, the share price tumbled and was soon once again fall below 10 sen.
That is now all in the past, and Ho wants investors and stakeholders to know that he is here to run and grow the bunkering business.
Straits has so far announced two straight quarters of profit for its financial year ended Dec 31, 2017.
For the second quarter ended June 30, 2017, Straits turned around with a net profit of RM623,000 on the back of revenue of RM2 6.81mil. Previously, it recorded a net loss of RM6,000 on the back of RM 20.23mil in revenue.
On a six-month basis, the company recorded cumulative net profit of RM 1.17mil on the back of RM 49.91mil in revenue.
Ho is hopeful of achieving a full and convincing turnaround for Straits by year end.
For now, the oil trading business contributes some 90% of its overall revenue. Moving forward, though, Ho said that oil bunkering would make up 90% of its business.
“I am here to steer the company. We are in a sweet spot as the sector is bustling and we are one of the very few licenced bunkering players around.
“I am personally very excited with the prospects in Malaysia. With the amount of activity taking place in the ports within the ports limit and anchorage, the question is how to fulfil all that demand,” said Ho.
For those who feel that bunkering only thrives when the oil and gas and shipping sectors are bustling, Ho said this is a huge misconception.
“Think of the busy ecosystem of the ports limit and anchorage. Whether or not the ships are moving, they need fuel to ensure the heating, maintenance or machinery is still running.
“Furthermore, for the big and newer seafaring vessels, they require high grade fuel, such as our premium marine gas. Diluted versions of fuel will in fact degrade the vessels. We want to position ourselves as the provider of such premium marine gas,” said Ho.
Straits closed last Friday at 21.5 sen. Due to its rights exercise, the share base has now doubled to 367.9 million shares, thus giving it a market capitalisation of RM79mil.
Straits has recently parked one vessel in the Pasir Gudang Port, and is looking to park its other vessel in the Labuan Port. It is also negotiating to have a presence in the Kuantan Port.
Straits first began its business diversification in end-2015 when it ventured into oil trading via its 51%-owned subsidiary Selatan Bunker (M) Sdn Bhd.
With the Petroleum Development Act License secured on Sept 5 last year by Selatan Bunker, Straits basically had the green light to start the business.
Three short months later on Nov 14, 2016, Straits entered into a memorandum of agreement with Sturgeon Asia Ltd and Straits Holdings Ltd, respectively, in which Ho is also a director and shareholder.
Straits would be acquiring two bunkering vessels from these companies – Sturgeon 1 and Straits 1. On the same day, Straits also called for a rights issue exercise.
This rights exercise raised RM 21.15mil, of which RM 2.8mil was set aside for the acquisition of Straits 1.
The acquisition of Sturgeon was completed in June this year for RM3.2mil, which was paid for by the issuance of new shares.
Meanwhile, the remainder of RM16.5mil will be used for working capital purposes.
Each vessel has a capacity of 500,000 litres. Ho is conservatively targeting for each vessel to do one refuelling a week, meaning a total capacity of some eight million litres for both vessels each month.
“These vessels will be contributing earnings to Straits from the fourth quarter of this year. Following this, the contribution from bunkering will significantly increase,” said Ho.
Ho owns an indirect 11.27% stake in Straits via Sturgeon Asia Ltd. He also owns a direct 4.36% in the company.
Ho is also a director in RH Pacific Shipping Agencies Ltd Hong Kong since 1991.