PETALING JAYA: Straits Inter Logistics Bhd has proposed to subscribe to a 51% stake in Megah Port Management Sdn Bhd (MPMSB) and has proposed a diversification of its existing business activities to include the provision of port management and related services.
The proposed subscription will be carried out via the execution of a subscription agreement entered into between Straits, MPMSB and LPM Holdings Sdn Bhd (LHSB) for the purpose to jointly undertake port management services of Labuan Liberty Terminal.
The exercise involves the subscription of shares in MPMSB, which enables Straits to leverage on the skills and expertise of Datuk Seri Tiong Chiong Kui and Idjal in port management services, of which the group is lacking of strong expertise and comprehensive experience at present. In addition, it will allow the group to share the financial commitment with LHSB thereby reducing the investment risk of the new business venture, whilst maintaining its controlling stake in the operating company for the purpose of undertaking port management services at Labuan Port.
Straits said the revenue and profit contribution from oil trading and oil bunkering services segment represents more than 90.0% of the total revenue and profit of Straits group over the last two years. Therefore, the group’s profitability is vulnerable to the fluctuations of the Malaysian oil trading and oil bunkering services industry.
“The proposed diversification, along with the recent diversification into land transportation and logistics services, will enable Straits group to mitigate its reliance on a single business segment, which has the potential to provide an additional revenue and income stream as well as to strengthen the group’s financial performance.”
Earlier this month, Straits accepted an award from the Labuan Port Authority for the provision of port operation and facility management services of Labuan Liberty Terminal for six years, commencing from April 1, 2020.
In view of the group’s existing license under Petroleum Development Act 1974 to provide oil bunkering services at Labuan Liberty Terminal, the acceptance of the letter of award (LOA) to carry out port management services is expected to increase the group’s competitive strength in the port where it already has presence to provide both port management services and oil bunkering services to the port users.
“Port management services and the group’s existing business are complementary businesses serving the same customer profile, namely logistics & shipping companies transporting cargo by sea, who will dock the vessels/ ships at port, or require storage or docking facilities at port. This will allow the group to leverage on its existing business activities so as to widen its services at ports to the future clientele whereby it increases the comprehensiveness of the group’s logistics and transportation services, which in turn improves convenience of service to existing and potential customers of the group.”
Additionally, the acceptance of the LOA may allow the group to dock its oil bunkering vessels at ports under its management in the future and may reduce future operational costs of the group.
“The board believes that the proposed diversification will potentially contribute positively to the group’s future earnings and improve its financial position moving forward.”
The proposed subscription is expected to be completed by first quarter of 2020. The proposed diversification will take immediate effect upon obtaining approval from the shareholders of Straits at an EGM to be convene in the first quarter of 2020.
source https://www.thesundaily.my/business/straits-inter-logistics-proposes-diversification-into-port-management-EG1954273
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