SILK: Contribution from new unit starts this financial year

Published: 2009/10/31

TOLL road operator SILK Holdings Bhd will start seeing positive contribution from its recently acquired oil and gas services unit this financial year ending July 31 2010.

However, it will continue to post an accounting loss.

"We'll start seeing positive contribution from AQL Aman Sdn Bhd, but amortisation of the tolled road assets is still a big factor," said executive chairman Datuk Mohammed Azlan Hashim.

"The highway operation is still a large part of SILK's business so it will be another year showing accounting loss," he told reporters after the company's annual general meeting in Kuala Lumpur yesterday.

The 37-km SILK Highway in southeast of Klang Valley links Balakong, Serdang, Sungai Long, Bangi, Kajang, Putrajaya and Semenyih.



Earlier, SILK shareholders approved a proposal that preferential shares be converted to ordinary shares when they mature in three years.

"Instead of coming up with RM20 million cash, we'll see an expanded capital base then," he said.

Following the purchase of the oil and gas business, SILK's gearing level has swelled to 7.8 times from 5.5.

Mohammed Azlan said once the ICULS (or irredeemable convertible unsecured loan stock) is converted to shares in three years, gearing should drop to 5.8 times.

He believes that SILK's prospects in the oil and gas sector is promising, given that the industry requires about 60 to 70 new platforms in the next three years.

Two or three anchor handling tug supply vessels and straight supply vessels are required for each platform for the purpose of transportation and logistic support. This translates to an additional demand of at least 120 new offshore support vessels.

"AQL Aman's 70 per cent subsidiary (Jasa Merin (Malaysia) Sdn Bhd) is operating 12 vessels in the South China Sea on long term service contracts with oil majors such as Petronas, Esso and Murphy Oil," Mohammed Azlan said.