SHAH ALAM: Destini Bhd – one of the few local defence companies listed in the KLSE – has become the builder of the APMM’s New Generation Patrol Craft (NGPC) through the acquisition of the company which originally won the contract.
From the Star (July 23, 2015) :
“KUALA LUMPUR: Destini Bhd will venture into the paramilitary boat segment through its proposed acquisition of Everyday Success Sdn Bhd from paramilitary boat maker Destination Marine Services Sdn Bhd (DMS) for RM90mil.
The acquisition, among others, will allow Destini to participate in the RM381.3mil contract awarded to DMS to supply six patrol vessels to the Malaysian Maritime Enforcement Agency (APMM).
Destini, which makes lifeboats, fast rescue boats and life rafts, told Bursa Malaysia that Destini Armada Sdn Bhd – its unit that services marine safety and survival equipment – had signed a conditional agreement to acquire 100% of Everyday Success.
The purchase consideration of RM90mil will be satisfied via a combination of cash payment of RM15mil and the issuance of 107.14 million new 10-sen Destini shares at an issue price of 70 sen apiece to pay for the remaining RM75mil. (Destini shares ended trading unchanged at 59.5 sen on Thursday. Its highest closing price this year was 67.5 sen on June 24.)
Everyday Success is currently dormant, with intended principal activities being the provision of shipbuilding and ship repair services. DMS will inject into Everyday Success several identified/agreed assets including the project won by DMS to supply the vessels to APMM within 35 months (from June 15), assets of the shipyard facilities in Klang to implement the project, and and all permits and licences to carry it out.
“The proposed acquisition represents a gateway for Destini to further increase its range of products and expand its supply of vessel segment in terms of product complexity, technology, technical knowledge and expertise by venturing into the supply, testing and commissioning of paramilitary boats and its related MRO services to a different market segment pursuant to the implementation of the project,” Destini said.
Apart from making and selling boats and parts, Destini provides maintenance, repair and overhaul (MRO) services specialising in the safety, survival and rescue equipment for the aviation, marine and oil and gas industries.
DMS has guaranteed that Everyday Success’ cumulative after-tax profit will be at least RM25mil in aggregate for the two financial years ending Dec 31, 2015 and 2016.
“Based on the above and the value accorded to 100% equity interest in Everyday Success of about RM90mil, the purchase consideration represents a price-to-earnings multiple of 7.20 times,” Destini said.
It added that the RM381.3mil contract value of the APMM project would provide earnings visibility up to May 2018, and the identified assets would offer future earnings potential.
The proposed acquisition is expected to be completed by the fourth quarter of this year.”
The deal to buy over the contract was initially announced on June 25. From the Sun:
PETALING JAYA: Destini Bhd has entered into a heads of agreement (HOA) with three parties to buy Destination Marine Services Sdn Bhd (DMS), involved in boat building, ship repair and marine-related engineering services, for RM90 million.
Destini said the acquisition is a gateway to further increase its range of products and diversify its supply of lifeboat segment by venturing into the supply, testing and commissioning of paramilitary boats and its related MRO services to a different market segment.
“At the same time, Destini would be able to set up its manufacturing facility in Malaysia at the Shipyard Land with ready main infrastructures which is currently owned by DMS,” it said.
The purchase consideration will be satisfied via new shares at 70 sen each in Destini and/or cash.
Under the HOA, Destini will also be given a profit guarantee of RM10 million for 2015 and RM15 million for 2016 to Destini, arising from the project.
Pending the completion of the proposed acquisition, DMS will proceed to award a sub-contract from its project to Destini.
On June 15, 2015, DMS received a RM381.3 million contract from Agensi Penguatkuasaan Maritim Malaysia to supply, deliver, test and commission six patrol vessels which it will sub-contract to Destini valued at RM372.3 million.
DMS signed the LOI for the NGPC at LIMA 2015 beating other established names in the local shipyard industry. And four months later it cashed out!.
Back in 2007, DMS had built two 18 metre boats – designated as Kelas Penggalang – for APMM at its yard at Port Klang. Industry sources told Malaysian Defence that the NGPC is likely to be built at the Port Klang yard which had undergone renovation recently.
As the NGPC is specified to be fitted with a 30mm RWS gun, three gun makers – MSI, Oto Melara and Aselsan – are said to be competing for the contract.
Industry sources said Oto Melara which supplied the 12.7mm Hitrole RWS to APMM for the BYO Marine Fast Interceptor Craft (10 boats) is the favourite to win the deal.
The three companies are also expected to be in the mix for the tender to supply 30mm guns for four APMM patrol boats, which closed on July 8. The 30mm guns will be fitted to KM Serasan (Sandakan), KM Memmon (Kota Kinabalu), KM Balong (Tawau) and KM Marlin (Sitiawan). It is unknown whether the selection of the 30mm gun for NGPC will have a bearing on this tender.
I am not sure of the type of boats based in Sabah but KM Marlin was donated by Nippon Foundation back in 2013. Marlin was supposed to be the APMM training vessel hence it was not armed originally but following the Lahad Datu incursion it was pressed into patrol duties.
It must be noted that Destini Bhd was established in 1991 under the name Satang Holdings Bhd as a supplier of aviation tooling and spare parts. Satang was among several local defence companies which in the late 90s were awarded long term contracts to be the giant in their respective fields.
The other companies are Airod (Aviation MRO), SMEO (small arms and ordnance), Deftech (land vehicles), Zetro (electronics), Sapura (communications) and PSC-NDSB (ship building). From the seven, three of the companies namely Deftech, PSC NDSB and Satang have seen a change of ownerships.
Satang was given the contract for the maintenance of emergency and survival equipment for the Armed Forces and other government agencies. Among the items the company maintained were life raft and flight helmets.
Since its transformation into Destini Bhd, the company had supplied Iveco and Vamtac trucks to the Army and recently FZ rockets for RMAF (signed at DSA 2014).
I have yet to find out whether the Boeing Insitu Scan Eagle UAV have indeed been selected for the NGPC as indicated by the specifications of the tender. Industry sources had told Malaysian Defence it was likely that the number of NGPC to be built will have to be reduce to five if the UAV requirement is maintained.
With the recent slump of the Ringgit against the US Dollar their observations may well be spot on. Which left one to wonder whether it will have been better for APMM to award the tender to a competent shipbuilder instead of one like DMS.
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