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Monday, November 11, 2013

Destini sees earnings boost from acquisitions (Star)

MAINTENANCE, repair and overhaul (MRO) service provider, Destini Bhd is looking to reap two-thirds or more of earnings from its recent strategic acquisitions into the commercial sector.

Notably these forays have morphed the company into an integrated engineering concern with a new focus in oil and gas besides the aviation and marine sectors that it is in.

In August this year, Destini announced that it was buying a 100% interest in Samudra Oil Kejuruteraan Samudra Timur Bhd for RM80mil in an all-share deal slated to be completed by early 2014.

Samudra is principally involved in tubular handling and running services for the oil and gas industry.

In the marine sector, Destini acquired all of Techo Fibre Group (TF Group), which specialises in MRO of lifeboat and davit systems for the marine industry.

The company also bought a 50% stake in Vanguard Composite Engineering Pte Ltd, a Singapore-based lifeboat manufacturer it bought into in late 2012.

“Previously we were merely a local company with interest in aviation and marine.

“With the ventures our geographical reach has widened and we now have exposure to oil and gas,” Destini group managing director Datuk Rozabil Abdul Rahman tells StarBizWeek.

Rozabil is Destini’s major shareholder with a 24.52% stake via privately held vehicle, BPH Capital Sdn Bhd.

He adds that via Vanguard, the company is one of the five largest lifeboats manufactures in the world in terms of the number of boats produced.

Vanguard has a capacity to produce about 200 boats per year out of its manufacturing facility in Nantong, China.

Its lifeboats are sold mainly to the Asia-Pacific and European regions.

In the case of TF Group, he says that it has a big client base including MISC Bhd and Petronas and serve markets spanning Africa, Asia, Europe, Middle East, North America and Oceania.

Up till last year, Destini mostly specialised in MRO of safety and survival products for the aviation sector deriving the bulk of its revenue from government defence contracts, which contributed 80% of the RM56.8mil revenue in financial year 2012.

Rozabil says the shift to secure more commercial contracts came as the company looked to rely less on the government to fuel growth.

“Going forward, we are targeting 70% of our revenue to come from commercial and the rest from government jobs,” he says, expecting the full contribution to kick in FY2014 after the oil and gas unit is in the fold.

He points out that the company has low gearing at 4 times and is in a net cash position.

“We have strong cash flows.”

Oil and gas appears poised to play a bigger role with Rozabil expecting it contribute 60% of earnings from the commercial division next year, with aviation and marine expected to bring in 20% respectively.

Besides defense, the company also plans to grow its MRO business in the private sector but first needs to secure the European Aviation Safety Agency (EASA) certification for it to excel in the field.

“We hope to secure this certification by the second quarter of next year.”

For now the company is busy with an order book totalling RM450mil.

In FY 2012, Destini recorded a net profit of RM7.05mil.

Rozabil hopes to put the company’s, - formerly Satang Holdings Bhd, chequered past behind.

To recap, the stock had slipped into PN17 in May 2008 and was suspended from trading for nearly three years from July 2009.

In early 2011 Rozabil who came on board to turnaround the company.

Destini was lifted out of PN17 category in April this year after a regularisation plan.

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