KUALA LUMPUR (Aug 26): Keyfield International Bhd (KL:KEYFIELD) is venturing into the dredging industry through the acquisition of a mega trailing suction hopper dredger (TSHD) at a price 61% below its independently assessed fair-market value.
The offshore support vessel operator on Wednesday entered into a deal with Inai Rimba Sdn Bhd, which has receivers and managers appointed, to acquire the 10-year-old Inai Kenanga on an "as-is, where-is" basis for US$24.67 million (RM99.7 million), according to the group's filing with Bursa Malaysia.
Keyfield will nominate a special-purpose vehicle (SPV) to ultimately own the vessel. The SPV will eventually be held 60% by Keyfield and 40% by Singapore-based Star Naval 1 Pte Ltd (SNPL), which has an option to increase its interest to 45%.
SNPL is co-owned by Starhigh Asia Pacific Pte Ltd and Naval Elite Ltd. Starhigh, founded in 2006, is involved in dredging, land reclamation, coastal protection and shoreline management across Southeast Asia.
"This acquisition marks our foray into the dredging industry and accelerates our expansion beyond the oil-and-gas sector," Keyfield group CEO and executive director Datuk Darren Kee Chit Huei said in a statement. "It is our second acquisition of a non-O&G vessel, following last year's acquisition of Keyfield Blessing, our cable-laying barge that is currently on-hire in the Middle East."
The group added that the move is part of Keyfield's longer-term plan to increase contributions from non-O&G activities to as much as 20% of total group earnings. Following the acquisition, its operations will span offshore support vessel chartering, cable laying, marine infrastructure, coastal development and dredging.
An independent valuation by Armal Marine and Offshore Sdn Bhd dated April 25 placed Inai Kenanga's fair-market value at US$63.7 million. Completed in 2016, Inai Kenanga was at the time the largest dredger in Asia and the third-largest in the world.
The Malaysian-flagged vessel measures 197.7m in length and has a deadweight tonnage of 41,244 tonnes and hopper capacity of 32,205 cu m. It was built by Selat Melaka Shipbuilding Corp Sdn Bhd with engineering support from Vuyk Engineering Rotterdam.
Keyfield said constructing a new vessel with similar specifications would cost upwards of US$150 million while Inai Kenanga itself was reportedly built at a cost of about RM1.2 billion.
"With the former owner of Inai Kenanga having entered receivership, we were presented with a unique opportunity to acquire this asset at below market value," Kee said. "Leveraging the strength of our balance sheet, this acquisition will be funded through our internal cash, hence not requiring any borrowings."
Keyfield will fund US$23.8 million of the purchase consideration while SNPL will contribute US$900,000. They will also make initial investments of US$400,000 and US$100,000 respectively.
SNPL, meanwhile, will bear the estimated US$15 million cost of reactivating the vessel. If the actual reactivation and pre-operating costs exceed that amount, SNPL has agreed to continue funding the excess through shareholder loans to the SPV.
Keyfield will fund its portion entirely from internally generated funds, including part of the proceeds from its recent disposal of Keyfield Compassion, without taking on additional borrowings.
Following its planned reactivation, Keyfield and Starhigh intend to pursue dredging projects across Southeast Asia, particularly Malaysia and Singapore, Kee said. "Starhigh brings relevant industry network and expertise that complements our marine asset ownership and operational capabilities," he added.
The group expects the acquisition to start contributing positively to earnings from FY2027, subject to successful reactivation and commercial deployment of the dredger.
Shares of Keyfield closed two sen or 1.5% lower at RM1.35 on Wednesday, valuing the group at RM1.09 billion. The stock has fallen more than 11% year to date.