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Business

Petronas' unit plans joint-venture for ship repair

A dock belonging to a joint venture between Malaysia Marine and Heavy Engineering and Eastern Pacific Industrial in Terengganu, Malaysia.

KUALA LUMPUR (NewsRise) - Malaysia Marine and Heavy Engineering Holdings, the services arm of Malaysia's national oil-and-gas company Petronas, said it is partnering Eastern Pacific Industrial Corp in a joint venture to repair and refurbish marine vessels.

MMHE will hold a 70% stake in the joint venture company operating in the eastern state of Terengganu while Eastern Pacific will hold the remainder, the companies said in a joint statement. The companies have acquired a 5,000-ton floating dock from South Korea to support the joint venture's business, it said.

"The joint venture company aspires to become a major player in the marine repair and services industry," said MMHE's acting chief executive Wan Mashitah Wan Abdullah Sani, noting the needs of ship-owners operating in the east cost of Malaysia to "have better access to repair and dry docking services nearer to their operations base."

Analysts said ship repair business, which typically commands a high profit margin, could provide a recurring revenue stream for the joint venture company amid current downturn in the oil-and-gas industry.

"We are slightly positive on this JV as it is in line with the company's strategy to establish stable recurring income," said Kenanga Investment Bank analyst Sean Lim. "However, near- term earnings impact could be muted given limited capacity of its newly acquired floating dock and potential start-up cost."

MMHE is a 66.5%-subsidiary of MISC, which in turn is 63%-owned unit of Petronas. The company primarily provides offshore construction services as well as repairs of liquefied natural gas carriers and oil rigs.

For Eastern Pacific, a company owned by the Terengganu government, the joint venture with MMHE is part of the state's efforts to "spearhead the oil and gas industrial sectors to grow stronger, and further contribute to the state's economic sector," said its chief executive Noor Fadzil Mohamed Nor.

The joint venture company will operate out of Eastern Pacific's integrated sprawling 180 hectare facility, the companies said. Eastern Pacific has another 60 hectares for future expansion within the so-called Kemaman Supply Base, according to the company's website.

"This strategic location in Terengganu is the lynchpin for oil and gas exploration and production activities in the east coast and South China Sea as well as the gateway for oil and gas and heavy industrial complexes in Kerteh and Gebeng," said AmInvestment Bank analyst Alex Goh.

Shares of MMHE ended Wednesday unchanged at 1.06 ringgit while the benchmark FTSE Bursa Malaysia KLCI was down 0.3%.

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