The NFP licence allows our group to expand our services as well infrastructure offerings, says MD
by HABHAJAN SINGH
ENGINEERING services company Handal Energy Bhd has seen a tough year with a good number of contracts in the oil and gas (O&G) being put on the back burner. The Sabah-based company went back into the red for the full year in its most recent financial year.
As the scene picks up on the O&G front, the company is also cracking open a new revenue path. It has just made headway in the telecommunication (telco) towers business and it has its eyes on Sabah coverage for a start.
“We were badly hit in the O&G business. It has made us want to diversify. When Covid-19 hit us, many projects were postponed or delayed. Our salary cost is high. We kept our people throughout the two years. It has been a big strain,” Handal Energy group MD Sunildeep Dhaliwal told The Malaysian Reserve.
Sunildeep and Sipitang MP Datuk Yamani Hafez Musa — son of former Sabah Chief Minister (CM) Tan Sri Musa Aman — are the largest shareholders in the company.
Last week, the company informed the local stock exchange that it has secured a network facilities provider (NFP) license from the Malaysian Communications and Multimedia Commission (MCMC) to venture into the business of building, owning and renting out telco towers and structures.
Its wholly owned subsidiary, Handal Digital Sdn Bhd, now has a Malaysia-wide licence for 10 years, effective Nov 2, 2022. The approval was received from the Minister of Communications and Multimedia, it told Bursa Malaysia in its filing.
“We are indeed excited and privileged to have obtained the NFP Licence and be part of Malaysia’s journey in advancing its national connectivity agenda. Through this licence, it also allows our group to expand our services as well infrastructure offerings,” Sunildeep said in the statement.
The award represented a “significant milestone” in Handal’s diversification journey, he added.
The new venture is a welcome respite to the group as it attempts to put itself back into the black, financially.
First, a look at what it does. Handal Energy is an integrated crane services and pipeline engineering services provider for the O&G industry in Malaysia. Since its inception, it has focused exclusively on innovating, relying on core skills, leveraging its experience and forming alliances with global partners in its desire to contribute significantly to the Malaysian O&G industry.
Listed on the main board of Bursa Malaysia in 2009, Handal Energy’s operating subsidiaries have over three decades of experience in manufacturing offshore cranes and offshore crane maintenance services.
In 2019, it expanded its business into pipeline maintenance services with the acquisition of Borneo Seaoffshore Engineering Sdn Bhd. To date, Handal Energ y has eight operating bases located throughout Malaysia in Kuala Lumpur; Paka and Kemaman (two) in Terengganu; Labuan (two) and Kota Kinabalu (Sabah) and Miri (Sarawak).
On personnel, Handal Energy boasts a team comprising fully- trained and experienced design, mechanical structural and electrical engineers, crane operators and technicians. It has 300 personnel of fully trained engineers, specialists, technicians and operators, a huge majority of them being Malaysians.
On the financial front, it is still a challenge. For the year ended June 30, 2022 (FY22), it posted a net loss of RM29.21 million on the back of RM30.27 million in turnover. In FY21, it posted a net profit of RM227,000 with a turnover of RM73.69 million. It means that Handal Energy ended the year with a massive drop in revenue, pushing its numbers into the red. Before the profitable FY21, it had reported net losses in the previous four years.
The lower FY21 revenue was mainly from crane manufacturinging, overhaul maintenance, piping isolation and pig trap maintenance. For the integrated crane services, jobs were disrupted due to the deferment of customers’ offshore activities. In the pipeline engineering service segment, there was a deferment of contract execution work to the next fiscal year.
In the fourth quarter ended June 30, 2022 (4Q22), its revenue dropped a whopping 95% to RM1.3 million from RM25.8 million in the corresponding quarter. The decrease in integrated crane services was mainly due to lower revenue from crane manufacturing, overhaul maintenance services and parts trading and the decrease in pipeline engineering services was mainly due to lower revenue from pipeline isolation, operational pigging and pig trap maintenance service, it said.
When discussing its prospects after announcing its FY21 numbers, Handal Energy noted that despite the opening up of the economy, the industry did not show any immediate improvement in terms of new work or tenders. It said this could be because the industry lost a lot of expertise and new people into the oil and gas big companies who are KPI driven, rather than industry concerned.
While it did not expect a significant change in clients’ business plans for the current period, it said it would expect a positive shift in business growth activities for 2023 and beyond as the crude oil profile continues to increase and stabilise above US$100/bbl.
At the same time, Handal Energy said it was currently transitioning its contract management operations to its headquarters office in Kuala Lumpur and Sabah, via its operations office in Kota Kinabalu, as part of its initiative to further enhance its operational service level.
“This strategy is key to ensuring a more positive clients’ operational services experience, and with an objective to ensure that that contract extension or renewal can be technically demonstrated, and commercially justifiable by respective clients,” it said in an exchange filing.
In light of the background, Handal Energy is looking excitedly at the new telco towers business. It is keeping close tabs on Digital Nasional Bhd’s (DNB) efforts to ramp up the 5G rollout, with targeted areas including parts of Johor, Penang, Sabah, Sarawak, Selangor, Negri Sembilan, Melaka and Perak.
“Sabah is untapped. We will start here, and then see where else we can go.
“We are now in the middle of the planning stage. The capital cost for the tower business is not high. Now with the license, we can plan forward,” he said.
But it is not going to be a walk in the park. Handal Energy will go head-on with Common Tower Technologies Sdn Bhd (CTTSB), a state-linked company that is also in the same business.
- This article first appeared in The Malaysian Reserve weekly print edition
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