Technic – Muhtar Hashim, CEO – Malaysia
Muhtar Hashim, CEO at PT Technic, shares with EnergyBoardroom the company’s extensive track record in delivering projects in Malaysia and abroad in the areas of piping & fabrication and the new phase the company is entering with the financial backing of APFT. Following market trends in Malaysia, PT Technic is moving into the maintenance sector and showing an interest in infrastructure projects such as RAPID.
Mr Hashim, early this year Aviation training firm APFT acquired a 51% stake in PT Technic. One of the conditions of the stake purchase in PT Technic was the profit guarantee of RM6 million. What was the rationale behind this acquisition?
As you rightfully mentioned, last year aviation training firm APFT Bhd proposed to acquire a 51 per cent stake in PT Technic as a means to diversify its earnings base. The acquisition of the 51 per cent stake was completed early 2014.
APFT, which was listed in 2011, had been negatively impacted by major airlines cutting back on training programs and the increasing difficulty for cadets to obtain funds as well as reports that there was a surplus of cadet pilots in the country. The company’s venture into oil and gas is a diversification exercise to bring on a new income stream before his other plans to expand the core business of flight training schools come to fruition. In fact, there have been many Malaysian companies, listed on the Bursa, that have diversified into oil and gas. Going forward, more than 50% of APFT’s earnings will be contributed by its oil and gas venture within a one to two-year period.
From PT Technic’s perspective, we were looking for a partner or additional investors. Two years ago our shareholders consisted of individuals and an affiliated company; Hiap Seng Engineering Ltd, a leading engineering service provider for oil & gas, petrochemical, chemical, pharmaceutical, power plants and infrastructure industry. Hiap Seng Engineering is based in Singapore. We were aiming to find a local partner that could provide us with additional capital in order for us to take on larger projects.
Currently we are in the midst of the consolidation process. We have no intention of restructuring the company or management; it is business as usual. Only the board of directors is represented by APFT. The existing key management continues to run the business. APFT’s role is only in financing.
What could you tell us about PT Technic’s positioning today?
PTT PT Technic was incorporated in 1991 as a contracting group specializing in Fabrication and Construction of Storage Tanks, Piping Works, Mechanical and Equipment Installation Works of large and complex plants, mainly for the Oil & Gas and Petrochemical industries.
We have been involved in some mega sizeable projects that include EPCC projects for a jet fuel storage terminal at Kuala Lumpur International Airport Terminal and a waste water treatment facility in Sudan. Furthermore PT Technic is participating in tender packages for construction of the Refinery and Petrochemical Integrated Development (RAPID) project. This mega-project within the Pengerang Integrated Petroleum Complex is a RM60 billion development by Petronas. Other than RAPID, PT Technic is also looking at a few revamp and maintenance jobs in Malaysia and the region.
At the time of the acquisition PT Technic, had an unbilled order book of RM67.3 million and was in negotiations for projects amounting to some RM105mil. Now that we are approaching the end of 2014, what have been the results and how does your order book look like today?
Our projection for this financial year is a net profit of RM 6 million. This is a realistic target and we expect to achieve this figure. Looking beyond current financial year, we naturally hope to maintain or preferably increase that number. But considering the high activity and mega investments in oil & gas currently in Malaysia, we are confident about the future.
In order to grow the business we are looking to enter the maintenance segment. Malaysia is currently constructing many plants, and once they are operational; the major opportunities in the long run will be in maintenance.
Currently, we have five projects ongoing, spread over Malaysia, including the SAMUR (Sabah Ammonia Urea) project in Sabah. Petronas Chemicals Fertiliser Sabah is building Malaysia’s first mega urea fertilizer plant in Sabah with a capacity of 1.225 MMTPA. SAMUR is a strategic project and is very critical to Sabah in supporting the oil and gas development in the State. PT Technic is responsible for building the Ammonia Double-Wall Tanks and we are also doing the piping work there.
For now we have enough jobs in our hands and, therefore, we are not planning to take on any more projects for this financial year. For 2015 and 2016 we have already engaged ourselves with key contractors for RAPID and a few other projects. We are second tier to carry out jobs under the EPC’s and negotiations are ongoing for us to either bid or negotiate on projects, which I believe will only start mid next year.
What sets PT Technic apart from its competition?
We have a strong track record in the industry. The company completed close to 60 projects over the 20 years of its operations. What sets us apart is that PT Technic is committed to continuously providing services that meet client’s expectations in reliability and quality, ensuring full compliance with safety policies and having well trained and experienced workforce for the work.
In the company’s history we have been working with key contractors including JGC, Chiyoda, Toyo, Technip, Dialog and many more. In terms of reputation and capabilities in the work scope that we cover, we are among the top 10 players in the industry.
Now that today you have established a reputation on the market and in an industry that is continuously under cost pressure and tough competition, which factors drive projects in the sector: price or reputation?
First and foremost, the requirement for local oil & gas related projects is to have a Petronas license. For international tenders, there is not such a requirement but an international bidder must come in with a local partner. I believe that a track record and reputation comes first as it is a key pre-qualifying criteria in bid evaluations.
Also, company’s participating in tenders also must demonstrate a healthy financial standing. Before being considered at all, companies have to fulfill certain financial requirements such as submitting financial records.
You mentioned earlier that PT Technic is a top player in terms of capabilities. Yet, it is not able to take on more projects this financial year. What is your strategy to attract and retain the best people?
Due to our track record and reputation we have managed to attract good people in the past. Overall we are not worried about the lack of engineers in the industry. We have a low turnover and our key staff has been with us for a long time. Moreover we have built a solid network of specialists that we can contact to conduct jobs for us.
Moving forward and looking to mega projects such as RAPID, we do not aspire to obtain every contract; PT Technic will focus on its area of expertise. Along the scope of our activity, we plan how many local and how many project staff will be needed from overseas. In fact, we are already entering into such discussions.
Looking ahead, where would you like to take the company?
Our vision is to be a one stop shop for Engineering, Procurement & Construction (EPC) services for the oil & gas and petrochemical industries. We also aspire to be a key provider for Total Plant Maintenance services for the industry.
Furthermore, I would like to see PT Technic going public and join the ranks of key top tier industry players not just in Malaysia but also in South East Asia.
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