BOUSTEAD HOLDINGS BERHAD

INTRODUCTION

History of Boustead Holdings Berhad

Boustead Holdings was established over 180 years ago and is one of the Malaysia’s
oldest conglomerates and is today one of the Malaysia’s leading conglomerates. It was then
established in year 1828 when Edward Boustead founded a modest trading company in
Singapore.
During the early stage, its core business was primarily import and export, as well as
shipping and insurance agents. As the trade was growing fast between the two territories and
the Straits of Malacca was vital at that period of time as the bridge gateway between Europe
and the Far East, Edward opened a different branch in Penang in the year 1864.
In the year 1911, Boustead diversified its business and began trading in rubber. The
company expanded into the management and ownership of rubber estates while at the same
moment exporting sheet rubber and latex. In conjunction to the development of new nation,
Malaya rise rapidly and Boustead expanded its business interest into import and distribution of a
variety of goods.
In the year 1961. Boustead had consolidated its different businesses to shape a new
public listed company known as Boustead & Co. Limited. In 1966, it is then changed to
Boustead Holdings Berhad and in following in the year 1976, the Group become a completely
owned Malaysian entity.

Boustead Today

Boustead PRIME Asset

● Boustead Plantations Berhad, a key participant in the plantation sector.

● Pharmaniaga, Malaysia’s largest listed integrated pharmaceutical group.
● Mutiara Damansara, an award winning township with strong retail offerings such as the
Curve and eCurve.
● BHPetrol, Malaysia’s only other national retail petroleum network.
● Boustead Naval Shipyard, Malaysia’s leading solutions provider for naval vessels.
● The Royale chain of hotels, a leading hotel chain in Malaysia.
● Portfolio of prime investment properties including a cruise centre.
● University of Nottingham Malaysia Campus, a top private university in Malaysia.

Boustead Heavy Industries Corporation Berhad (BHIC)

Boustead Heavy Industries Corporation Berhad (BHIC) is a subsidiary of Boustead

Holdings Berhad and listed on Main Board of Bursa Malaysia. BHIC is a company that
specialized in shipbuilding, ship repair, naval engineering and vessel-related services which is
listed on the Main Board of Bursa Malaysia Securities. Their other services are include heavy
engineering of structures for the oil and gas sector.As at 10 February 2015, the major
shareholders of BHIC is the parent company itself Boustead Holdings Berhad with a 65%,
followed by Lembaga Tabung Angkatan Tentera (LTAT) with an 8.15% of shares and Lembaga
Tabung Haji (7.64%). The remaining shares own by minority shareholders such as Amanahraya
Trustees Berhad, B & A Family Holdings Sdn Bhd, few individuals and other organisations.
BHIC is headquartered in Menara Boustead, Jalan Raja Chulan, Kuala Lumpur and currently
umbrella for 1,787 employees nationwide.
BHIC was formed in 2005 when the Government of Malaysia has instructed a merger
between Boustead Naval Shipyard Sdn Bhd (Boustead Holdings Berhad’s business arm for
commercial shipbuilding) and the problematic company, Penang Shipbuilding and Construction
- Naval Dockyard Sdn Bhd (PCS-ND). PCS-ND was a company based in Lumut, Perak with its
business activity was to maintain Royal Malaysian Navy (RMN) vessel as well as RMN
dockyard. The mismanagement happened in the company in the early 2000 resulting to the
merger of PCS-ND and BHIC. Since then, they have expanded and becoming one of the
biggest shipbuilding and ship repair company in the country.

COMPANY PROFILE
- Mission, vision, core business activity

Corporate Vision
● To hold strong to our tradition of delivering solid and stable growth while nurturing talent
that will bring about a higher level of excellence in all endeavours that the Boustead
Group undertakes.

Corporate Mission
● To place the interest of our shareholders as the highest priority by maximising
shareholder value.
● To acknowledge our employees as our most valuable assets.
● To continue development of our human resources to retain a competitive edge in the
industry.
● To accept the importance of our clients by providing products and services of the highest
quality.
● To enhance our global position while proudly representing Malaysia.
Group Motto
● 'A Tradition of Strength and Stability, A Vision of Growth and Excellence'.

Philosophies
● To constantly develop organisational policies and corporate systems to fulfil the needs of
dynamic business environments.
● To continuously improve customer satisfaction by enhancing human resource
development strategies and managing resources efficiently as well as practise a positive
corporate culture.
● To hold firm to a balanced management style of being prudent in seizing business
opportunities that enhance shareholders value.
● To maintain a corporate governance culture that advocates best practices in business.
● To embrace diversity and entrepreneurship in our daily dealings.

Vision - The leading maritime , defence and energy solutions provider

Mission - To deliver products and services meeting quality, time and cost objectives to
maximise stakeholder’s returns

Board of Directors for Boustead Heavy Industries

Heavy Industries List of Companies

MHS Aviation Berhad Dominion Defence & Industries Sdn Bhd
Atlas Defence Technology Sdn Bhd BYO Marine Sdn Bhd
BHIC Bofors Asia Sdn Bhd BHIC Electronics and Technologies
BHIC Defence Technologies Sdn Bhd Sdn Bhd
BHIC Petroleum Sdn Bhd
Boustead Heavy Industries Corporation
Berhad
Boustead Naval Shipyard Sdn Bhd
Boustead Penang Shipyard Sdn Bhd
Boustead Yacht Sdn Bhd
BHIC Navaltech Sdn Bhd
Boustead DCNS Naval Corporation Sdn
Bhd
Contraves Advanced Devices Sdn Bhd
Boustead Atlas Hall Sdn Bhd
BHIC Aeroservices Sdn Bhd
· Milestones
· 1800s
1828 Boustead & Co. founded in Singapore.

1864 Boustead opened first branch office in Malaya in Penang.

· 1960s
1961 Boustead & Co. Limited was listed on the Malayan Stock Exchange.

1966 Assumed the name Boustead Holdings Berhad.

· 1970s
1976 Boustead became a wholly-owned Malaysian entity with Lembaga
Tabung Angkatan Tentera (LTAT) as its shareholder.

· 1980s
1984 Acquired 20% interest in UAC Berhad.

· 1990s
1990 LTAT acquired controlling interest in Boustead.

1997 Acquired 20% equity interest in PSC Industries Berhad.

· 2000s
2004 Privatisation of Kuala Sidim Berhad and SCB Developments Berhad.

2004 Established the Curve, Malaysia’s first pedestrianised lifestyle shopping

mall, in Mutiara Damansara.

2005 Acquired 31% interest in PSCNaval Dockyard Sdn Bhd, now known as
Boustead Naval Shipyard Sdn Bhd.

2006 Delivered the first offshore patrol vessel to the Royal Malaysian Navy.

2007 Boustead successfully turned around PSC Industries Berhad,which was

 an ailing PN17 company, restructured it as Boustead Heavy Industries
Corporation Berhad and relisted it on the Main Board of Bursa Malaysia.

2007 Boustead Naval Shipyard Sdn Bhd became a subsidiary of Boustead

Holdings Berhad.

· 2010s
2011 Acquired MHS Aviation, marking the Group’s entry into the aviation
sector.

2012 Privatised UAC Berhad.

2014 Boustead Cruise Centre Sdn Bhd successfully completed the acquisition
of a jetty and 69 acres of land in Pulau Indah.

COMPETITIVE ADVANTAGE
- Industry analysis, SWOT, Porters’

SWOT Analysis

Strength Weakness

- Have extensive experience in - Expensive cost of operation structure

domestic market. - High government tax structure
- Very skilled and experience labor - Huge investment required in research
force. and development
- Reduced labour cost - Higher loan rate
- High profitability and revenue - Very Competitive Market
- High growth rate - Future profitability

Opportunities Threat

- New prospective international market - Increasing labor costs

- Increasing growth rates and - Increasing rate of interest of loans
profitability - Changes in government tax
- Increasing demand of the market - Growing competition
- New acquisition - Growing competition from developing
- Venture capital countries
- - Financial capacity
- Price changes
- Cash flow

- Competitors
 There are six biggest shipyards in Malaysia that are capable of building merchant ships.
They are Malaysian Marine Heavy Engineering (MMHE), Sabah Shipyard, Ramunia, Sasacom
and Muhibbah that are registered with Ministry of Finance Malaysia. MMHE is the biggest
shipyard that owned by MISC Bhd , the national shipping line.

It was predicted that demand for some of the vessels building are increased beyond 2015.
There are vessel associations in Malaysia projected that hundreds of new vessels are required
in order to cater activities for oil and gas companies’ in Malaysian waters till the year 2020.
Local maritime companies should take this big opportunity to expand their present and
businesses in the local SBSR industry scene.

However, BHIC as a major player seen this differently. BHIC looked at the current trend
of instability of oil price globally could give some big impact towards the industry and the
Company specifically. If the trend keeps going for the next couple of years, it would create some
uncertainty in the SBSR industry due to oversupply of the vessels in the market as well as low
profit margin to the shipyards companies. This would generate competition among the industry
players regionally and domestically.

More and more ship operators preferred for sophisticated new vessels with the latest
computerized technology to decrease their operational expenditure (OPEX) and BHIC seen this
as challenging to them. Regionally, competition coming from China ship building companies are
tense as they may produce bulks of new vessels at the lower than market price within short
period of time. This would give China competitive advantage as many oil and gas companies
now tend to use younger vessel in their daily operation as they could maximize their profit
through hassle free new vessel.

While the ship builders from the countries such as Japan and South Korea provides
competition in terms of their ability to provide with the latest technology to the customers. Their
ability to build vessels with multi-function is the competitive edge to BHIC where some of local
ship operators tend to purchase new vessels from these kind of countries.

The new policy by neighboring country which is Indonesia Cabotage Policy try to restrict
foreign vessel to operate in Indonesia waters. Indonesia also in formulating policy of ‘local built’
under Beyond Cabotage program. BHIC looks this as Indonesia trying to kill off competition as if
the program being implemented, the number or orders from the country would be dropped off
and this would affect SBSR industry in Malaysia as well as BHIC business itself.
 In the local scene, numbers of companies or conglomerates could be considered as
direct or indirect competitors for BHIC. Besides, all these companies could also compliment to
each other’s. Below is the few of the major competitors of BHIC with some of their company’s
description and business activities.

PRODUCT/SERVICES

Products
a) Naval Vessels
b) Commercial Vessels
c) Composite Materials
d) Munitions

Services

a) Shipbuilding Services
Their primary services is to offer best shipbuilding facilities and infrastructure .This company
have three main yards that located in Jerejak (Boustead Penang Shipyard), Lumut (Boustead
Naval Shipyard) and also in Langkawi (Boustead Langkawi Shipyard). They also well known for
capability to caters naval and commercial vessels.Other than that , this company are well
experienced in build luxury yachts, anchor handling tugboats, twin screw tugboats, offshore
supply vessels, aluminium high speed vessels and vehicular ferries.

b) Ship Repair
This company provide experienced and efficient manpower to conduct any type of ship repair or
maintenance works including engine repair, electrical and electronic testing .Their maritime
clients is usually from navy agencies from countries in Australia, New Zealand and France.This
company also do offer yacht repair services including yacht painting with finishing and interior
outfitting.

c) Heavy Engineering / Fabrication

Boustead Heavy Industries also has the ability to offer range of fabrication works of oil and gas
sector and civil engineering related industries .

d) Defence Related
Boustead Heavy industries have a very efficient manpower and experiences in handling the
repair, maintenance, and servicing naval or land based electronics defense systems especially
for Royal Malaysian Navy.

In order to support BHIC maritime business activities, BHIC offered three (3) shipyards
that situated in:
 a. Jerejak, Penang;
b. Lumut, Perak; and
c. Langkawi, Kedah.

Shipyard Services offered

Lumut Shipyard ● build and maintenance of naval and commercial ships

(Perak) such as patrol vessels, yachts, tugs and offshore
ships
● fabrication works for container cranes and steel
structures for the oil & gas
● operated by Boustead Naval Shipyard Sdn. Bhd

Jerejak Shipyard ● shipbuilding, repair and servicing. Ship services

(Penang) include anchor handling tugs, cargo ships and other
commercial ships
● operated by Boustead Penang Shipyard Sdn Bhd

Langkawi Shipyard ● expertise in the repair of luxury yachts and has a 100-
(Kedah) meter berthing facility
● expertise for painting and blasting, mast repair,
fabrication, electrical/Electronic activities
● operated by Boustead Langkawi Shipyard Sdn Bhd.

Table X Service offered by shipyards own by BHIC

PRACTISES/ STRATEGY

Shipbuilding / Ship Repair Strategic Plan 2020

Malaysian government have introduced Shipbuilding / Ship Repair Strategic Plan 2020 (SBSR)
that aimed to increase its target of 10% of profit industry growth before 2020. In realizing the
aims, several strategies have been set up that included strengthening the institutional
framework, establishing business friendly policies that enhances the industry growth and
strengthening regulatory frameworks to assure that the integrity of SBSR companies while
improvising the quality of their products. Based on human capital development, an adequate
and capable workforce must be given which works in align with the new SBSR technologies.
Investments are being pumped in the form of financial aid and incentive packages. However, in
2014 and the beginning of 2015, the drastic drop in oil price have raised worries among the
shipyard operators.

One of the main strategies to boost the development of the industry under SBSR is by using the
local design to adopt the new technologies. At the time being, most of the new technologies are
imported from other countries. Boustead Heavy Industries Corporations Berhad (BHIC) has
embarked on a project, Economic Transformation Program (ETP) where it develops local OSV
design in align with the aim to increase Malaysian share in shipbuilding by increasing the local
content and local vendors.

FINANCIAL ANALYSIS AND HIGHLIGHTS

Highlights in 2014

Heavy Industries has get profit of RM 26 million compared with a loss of RM 89 million in
2013 as they have direct result from the improved contribution from Boustead Naval Shipyard
Sdn Bhd (BN Shipyard).Heavy Industries see external pressure on its bottom line as there is
vast potential owing to the construction of Littoral Combat Ships and maintenance of defence
assets. In 2014, this organization sign contract worth of RM 9 billion between BN Shipyard and
the Government Malaysia to deliver six LCS.
Maintenance, Repair and Overhaul (MRO) is main contributor to business growth in
2014.
Impact of earnings- Downward trend of oil prices coupled with Petronas announcement of a
significant reduction in capital expenditure.
Under the leadership of Tan Sri Dato' Seri Ahmad Ramli Hj Mohd Nor as a Managing
Director of the company, BHIC made a sound financial achievement in 2014 with a revenue of
RM332.8 million and a profit after tax (PAT) of RM17.9 million compared to RM319.1 million
revenue and PAT of RM3.2 million in the previous year. At the end of 2014, BHIC’s net assets
were at RM1.21 per share and shareholders’ funds were at RM300.6 million. In order to expand
businesses further, BHIC has also invested in multiple streams of sub-business sector within the
SBSR industry through forming subsidiaries such as Boustead Penang Shipyard Sdn Bhd,
BHIC Marine Carriers Sdn Bhd, Boustead Naval Shipyard Sdn Bhd, BYO Marine Sdn Bhd and
many more.

Highlights in 2015

The growth forecast for these nations in 20156 have been marked down given the
appreciation of the United States Dollar and this impact is slowing trade in Asia.
BHIC has been reorganised to get better operational efficiencies and organisational clarity.
BHIC has sell the three of their chemical tankers at USD 5.7 million to Jasa Merah (Labuan) Plc
in December 2015.

Reason for Financial Challenges

Drop in Oil Prices

As the world oil prices drops, most of oil and gas related companies cut their development
expenditure by reducing the demand for the offshore support vessels.

Chartering Segment
This company having loss due to high direct cost by chemical tankers. BHIC have decided to
sell tankers in year of 2016.

Additional Cost
Naval Shipyward having loss due to restoration for KD Perantau and additional cost for ship
repair projects, no new shipbuilding projects during 2015 and adverse foreign exchange.As the
result, BHIC has sell the three of chemical tankers at USD 5.7 million to Jasa Merah (Labuan)
Plc in December 2015.
ISSUES/ CHALLENGES
 1) Competition from Developing Countries (Vietnam and Thailand) that Offer Low Labor
Costs
The developing countries such as Vietnam and Thailand offer cheap labor cost compare to
Malaysia.

2) Retention and recruitment of experienced and skilled workers

As most higher education institute more focused to produce more engineers in various fields,
the ones that offer Naval architecture and marine engineering courses that are very important to
shipbuilding and ship repair is very limited.Even this industry always related as intensive labor
industry, there are unique skills with good training and qualification is required.

3) Sharp decline in commodity prices especially oil and gas.

The continuous declining of oil prices gives bad impact to shipping industry as major oil
companies has reduced their offshore support vessel services and fabrication work to cut down
their expenditure.

4) The continuation of Malaysia currency depreciation against US dollars and unstable

foreign exchange market
This factor cause reduction in exports as low demand as a result of global economic slowdown.

Where are WE? Current practises and work flow

Most of the projects secured currently comprise the target margins and is not serious on the
delivery time, specification and costs

Insufficient Technical Specification & Unplanned/Late Requisition is common

Projects are given randomly and in the team members are allocated freely. They do not really
focus on giving project based on experience and expertise

Vendors and suppliers are just selected. They do not really have a good platform to select their
vendors and suppliers

No detail industry research (forecast and outlook) done to fully understand the complexity and
problems facing the industry

The company has No regular review of the Strategic Business Strategy

Financial and delivery problems

In 2005, the Public Accounts Committee (PAC) brought up the public attention after they
unveiled serious corruption in the PSC-ND management and also the failure to meet the delivery
date of the first NGPV vessel. Local media revealed that the construction of the remaining
vessels was also delayed due to financial difficulties in the PSC-Naval Dockyard. Reports of
nonpayment to some 40 subcontractors who were owed RM180 million was met by shock from
the public. PSC-ND also failed to pay some RM4 million in contributions to the Employees 
Provident Fund (EPF), the Inland Revenue Board and the National Co-operative Organisation
despite having made salary deductions from its 1,500 staff. [2] PSC-ND has also reportedly
sought another grant of RM1.8 billion from the government to complete the vessels.

The PAC claimed that RM120 million would be needed to salvage the first two vessels, and that
the Government also needed to pump in at least RM80 million to pay off unpaid local vendors,
suppliers and contractors. This led the NGPV program into a crisis.

The Malaysian government then put in a new management team and the project was revived.
Boustead Holdings Bhd, also a Government linked company, took up 37% of stake and became
the single largest shareholder of Penang Shipbuilding and Construction Industries (PSCI). As a
division of PSCI, PSC-ND was renamed Boustead Naval Shipyard Sdn Bhd and merged with
Boustead's commercial shipbuilding companies to become Boustead Heavy Industries.

The first two vessels were eventually delivered and accepted by the Royal Malaysian Navy in
2006, after a delay of some 18 months.

In 2009, Boustead Heavy Industries Corporation Bhd reached an agreement with Yonca-Onuk
JV of Turkey, a well known interceptor craft manufacturer to set up a joint venture. Through this
joint venture, BYO Marine was formed, named using the names of both companies involved.
BYO Marine designs, builds, commissions and supplies high speed advanced composite boats to
South East Asia and is supported by an experienced team from Yonca-Onuk JV.[6] BYO Marine
supplies interceptor craft to the Malaysia Maritime Enforcement Agency and offers missile
equipped fast attack craft designed by Yonca-Onuk JV.

In July 2010, Rheinmetall Defence of Düsseldorf, Germany, and Boustead Heavy Industries

Corporation Bhd of Kuala Lumpur, Malaysia, entered a strategic agreement for the joint
ownership of Contraves Advanced Devices Sdn Bhd located in Malacca. Under the joint
agreement, Boustead Heavy Industries Corporation took up a 51% stake in the Rheinmetall
subsidiary Contraves Advanced Devices effective 1 July 2010. Rheinmetall retained a 49% share
in Contraves Advanced Devices and control of the operational management. Rheinmetall
Defence and Boustead intended a further collaboration to serve new markets as well as enabling
a technology transfer that would substantially benefit both Malaysian industry and the Malaysian
military. The partnership sought to foster the growth of high-tech production in Malaysia to
strengthen the country's defence technology industrial base and open additional opportunities for
exports.

In May 2011, Boustead Heavy Industries expanded into the munitions industry when it signed a
joint-venture deal with Prokhas Managers Sdn Bhd (PMSB), a Ministry of Finance (Malaysia)
company to supply artillery propellants to the Malaysian Armed Forces. Under the joint venture,
the new company, Pyrotechnical Ordnance Malaysia Sdn Bhd, would produce double base
artillery propellants at a plant located on a 21-acre site in Bentong, Pahang. BHIC has invested
RM58 million into the plant and the plant was expected to produce munitions by Q3 2012. BHIC
owns a 49% stake in the company.

Boustead Naval Shipyard

PSC-Naval Dockyard, the company now absorbed by Boustead Heavy Industries Corporation

Berhad, was made the major contractor for the building and delivery of the New Generation 
Patrol Vessels (NGPV) programme for the Royal Malaysian Navy. An international tender for
bids was announced, with Germany, Denmark, the Netherlands, the United States, Australia,
United Kingdom and Italy amongst others submitting their bids. PSC-ND was set to joint venture
with the winner to complete the program.

The German Naval Group (GNG) with their proposed model, based on the Blohm + Voss
MEKO 100 design, won the bid. A contract was signed on 13 October 1998 for an initial six
units, with the GNG as the major sub-contractor. A member of the GNG, the Hamburg-based
Blohm + Voss was to build the first two ships, while PSC-ND was to complete the final fitting
out and trials. The remaining ships were to be built at the PSC-Naval Dockyard from ship
modules supplied by the GNG, with a gradual increase of local content.

Subsequent financial and delivery problems of PSC-Naval Dockyard caused by serious

corruption caused the Malaysian government to engage Boustead Holdings Bhd to acquire PSC-
Naval Dockyard and complete the program after a delay of 18 months. The class of ship will
later be named Kedah-class.

In 2011, Boustead Naval Shipyard was awarded a RM9 billion (US$2.8 billion) contract for the
construction of 6 Second Generation Patrol Vessels for the Royal Malaysian Navy. Boustead
Heavy Industries will design the ship with DCNS acting as the design authority and build all 6
ships entirely in Lumut, Malaysia. This represented the largest contract for the company since
formation. The contract for the ships included intellectual property rights and technology 
transfer. The shipyard will undergo a major upgrade to accommodate the construction of the
ships.

At DSA 2014, the program manager Mr Anuar replied to an interview saying that "The program
is progressing rather well, with some parts already in critical design review" and "We expect the
first ship to be finished by 2017 or early 2018".[10] He also commented that the ships are "full
fledged frigates and in my opinion, will be a huge deterrent for the Royal Malaysian Navy."

Various subcontracts like the Thales CAPTAS-2 Towed array sonar, the Bofors 57 mm gun,

torpedo launching systems have already been awarded and the first ship is expected to be
completed in 2018.

Way Forward
Shipping industry is seen as major contribution to the growth of trade and economic
development of Malaysia. It is essential that efforts be made to bolster the capacity and
performance of the sector by way of learning from the successful experience of leading
shipbuilding nations.

BHIC are committed to overseeing the development of the SBSR industry. BHIC with its capital
involvement in shipbuilding and ship repair will garner every effort to ensure sustainability in the
shipbuilding sector as well as maximise its return on investments.

BHIC has an on-going programme to enhance business efficiency. The outlook is moderate,
however, in terms cost management, improving efficiency and productivity, enhance project
management and execution and deliver projects on budget and on time in order to pursue growth
and drive value.

Operation
In May 2012, the launch of the Entry Point Project (EPP) “Developing Sustainable
Competitiveness in Shipbuilding and Ship Repair” ,BHIC has drawn up a structured blueprint for
a cohesive development in the Group’s key focus areas of ship design and engineering. There is
also equal emphasis in developing and supporting initiatives to enlarge the local maritime
support industry.

In this challenging business environment where there is intense competition, a transformation

roadmap has become a necessity for BHIC to continually improve and achieve long term
success. BHIC has a Transformation Steering Committee which provides leadership, direction
and drives transformation. One of the key activities undertaken was the review and
implementation of comprehensive Standard Operating Procedures (SOPs) across the Group. The
objective was to ensure that processes followed meet the required internal quality standards. The
newly formed Transformation & Continuous Improvement Department has been tasked to ensure
that these SOPs remain current and comprehensive.

Beside that’s, some of the initiatives undertaken have a positive impact on the environment,
including exercises to reduce energy consumption and the conversion of waste materials to
productive purposes which were conducted at our shipyards.

For shipbuilding to prosper and to benefit other associations and downstream industries, the
design capability must be nurtured, developed and protected. Design capability develops over
time. It is the most expensive commodity to acquire and maintain but is definitely the most
valuable asset in the shipbuilding value chain. It is the designers’ prowess, not only in ship
design but also in the general engineering sector which will ultimately develop the components.

As part of their cost saving measure, BHIC had invested in a new system called Budgeting,
Planning and Forecasting & Business Analytics System (BPFA) based on the IBM TM1 Cognos
platform. BPFA creates efficiencies in the budgeting process by eliminating tedious manual
work. Phase 1 of the project was successfully completed for use in the 2015 budget cycle. Phase
2 of the Project focuses on analytics and performance monitoring, and will be implemented in
the near future.

In order to further strengthen their operation cost, they had come out a programme to manage
their vendors. Today we have 5 vendors under the Vendor Development Programme (VDP)
scheme which have successfully completed the Enterprise Innovation Intervention Programme.
BHIC will continue to source more capable, efficient and reliable vendors to be considered under
the VDP scheme, which will be managed as an integral part of our Group Supply Chain and
Vendor Development department. As a result, these VDP vendors managed to reduce their cost
and wastage in a bid to contribute towards a greener environment. They were also able to
increase productivity and profits and are now able to become more competitive as a business
which can cater to both local and international partner
Customer Oriented
In this environment, BHIC need to balance their business portfolio to continue to be a strategic
imperative for us to ensure financial buoyancy and an optimal asset mix. BHIC will be to
reposition them for growth and to explore opportunities which create business sustainability for
BHIC.

Their expansion programme in tendering for oil and gas projects has paid off with the award of a
topside fabrication contract worth RM108 million in 2013. In the near future, BHIC intends to
acquire a dedicated yard to expand its capacity and scope of

BHIC have have also seen increased collaboration with their sister companies under the
Boustead Group. For example, BHICAS is working closely with project managers from
Boustead Properties Berhad to construct the helicopter hangar for the MRO Centre in Subang
whereas BEAT is part of the Boustead consortium established to propose surveillance system
upgrading along the Malaysia - Thailand Border. In addition, BEAT is expected to benefit from
various BDTS contracts via providing the expertise to service electronic components, including
printed circuit boards.

Several joint ventures have capitalised on the relationships built with their other shareholders. In
October 2013, ADT successfully renewed the International Representative Agreement with SAM
Electronics GmbH for two years. The agreement appoints ADT as a representative for SAM
Electronics GmbH’s products and systems in Malaysia.
Talent Management

“Our People Our Asset” BHIC AR 2015

BHIC recognises the importance of maintaining good employee relations to help increase overall
productivity. BHIC remain fully committed to developing a quality workforce to serve the needs
of our customers. Talent development continues to be a strong focus in ensuring internal bench
strength remains resilient. Developing employees and investing in learning technology is
important while championing a diverse and inclusive workforce.

BHIC’s primary employee retention strategies focus on creating and maintaining a workplace
that attracts, retains and nourishes high potential employees. Building a highly engaged
workforce takes a combination of many drivers such as senior leadership commitment,
performance management, career opportunities, learning and development, reward and
recognition, the working environment and empowerment of employees and many more.

A number of training programmes were conducted across the Group, focusing on all 3 categories
of employees: subordinate, supervisory and management. Among the programmes conducted
were Business English Classes, Supervisory Skills, Contract Management, Project Management,
Health and Safety, Integrity and GST updates. BHIC signature talent initiative, the Young
Engineer Scheme (YES) continues in collaboration with training academy, BHIC Marine
Technology Academy Sdn Bhd. During the year, they had also developed an in-house
programme on Shipbuilding and Ship Repair modules. As a result total of 22 new YES
participants have graduated in September 2015.
SECTION B – TEACHING NOTES
Learning Objectives
1. To identify and analyse the issues in the company.
2. To explore framework that supports in decision making.
3. To have a better understanding the role of managers in decision making.
4. To identify the key stakeholders involved and determine how the decision will affect
them.
5. To explore the action can be taken by company to improvise and solve the problem.
Issues Framework
This case study identifies several issues that needs to be solved in order to boost the
company’s performance. First issue identified is the competition from developing countries
(Vietnam and Thailand) that offer low labor costs. The developing countries such as Vietnam
and Thailand offer cheap labor cost compare to Malaysia.

Secondly, retention and recruitment of experienced and skilled workers.As most higher
education institute more focused to produce more engineers in various fields, the ones that offer
Naval architecture and marine engineering courses that are very important to shipbuilding and
ship repair is very limited.Even this industry always related as intensive labor industry, there are
unique skills with good training and qualification is required.
The third issue is the sharp decline in commodity prices especially oil and gas.
The continuous declining of oil prices gives bad impact to shipping industry as major oil
companies has reduced their offshore support vessel services and fabrication work to cut down
their expenditure.
Fourthly, the continuation of Malaysia currency depreciation against US dollars and
unstable foreign exchange market.This factor cause reduction in exports as low demand as a
result of global economic slowdown.

Teaching Instruction
The teaching approach used to teach this case study are the combination of few teaching
approaches. The target audiences will be taught by using the content-focused methods and
interactive / participative methods. To study and understand better about the case, both instructor
and learner have to fit into the contents that is taught and need to carefully analyse the content of
the case. The last method interactive / participative approach are driven by the situational
analysis through the discussion process among the learners and between learners with the
instructor. Through discussion and participation, both learners and instructor require
participatory understanding of varied domains and factors in the case.
Teaching Plan

Description Allocated Teaching

Time Aid

Pre-class video – http://www.bhic.com.my/corporate-video.php 15 Video

minutes

Instructor can ask learners about their thoughts on the video 30 minutes -
and ask them to share about any other issues they have come
across which is similar to any company related to the same
industry

Learners to read the entire case and after that they can be 30 minutes Case
divided into few groups where each group will consist of 5
people for discussion.

60 -

Learners can be asked to prepare the answers about the case minutes

study by using presentation slides.

Questions:

· Analyse the issues surrounding the case.

· As the top management what you will do after

discovering the issues in the company

· Recommend necessary intervention initiatives to boost

 the company’s profits.

Instructor to comments about the presented content and 15 minutes -

wrap up the case.

Suggested Questions
1) What are the issues that could be identified in the company?
2) What is the marketing strategy used by the company?
3) What are the company’s strength and weakness?
4) Who are the competitors and the industry player?
5) What are recommendations for the company’s improvement?

Recommendations
In this challenging business environment where there is intense competition, a
transformation roadmap has become a necessity for BHIC to continually improve and achieve
long term success. BHIC has a Transformation Steering Committee which provides leadership,
direction and drives transformation. One of the key activities undertaken was the review and
implementation of comprehensive Standard Operating Procedures (SOPs) across the Group. The
objective was to ensure that processes followed meet the required internal quality standards. The
newly formed Transformation & Continuous Improvement Department has been tasked to ensure
that these SOPs remain current and comprehensive.

Beside that’s, some of the initiatives undertaken have a positive impact on the environment,
including exercises to reduce energy consumption and the conversion of waste materials to
productive purposes which were conducted at our shipyards.

For shipbuilding to prosper and to benefit other associations and downstream industries, the
design capability must be nurtured, developed and protected. Design capability develops over
time. It is the most expensive commodity to acquire and maintain but is definitely the most
valuable asset in the shipbuilding value chain. It is the designers’ prowess, not only in ship
design but also in the general engineering sector which will ultimately develop the components.

As part of their cost saving measure, BHIC had invested in a new system called Budgeting,
Planning and Forecasting & Business Analytics System (BPFA) based on the IBM TM1 Cognos
platform. BPFA creates efficiencies in the budgeting process by eliminating tedious manual
work. Phase 1 of the project was successfully completed for use in the 2015 budget cycle. Phase
2 of the Project focuses on analytics and performance monitoring, and will be implemented in
the near future.

In order to further strengthen their operation cost, they had come out a programme to manage
their vendors. Today we have 5 vendors under the Vendor Development Programme (VDP)
scheme which have successfully completed the Enterprise Innovation Intervention Programme.
BHIC will continue to source more capable, efficient and reliable vendors to be considered under
the VDP scheme, which will be managed as an integral part of our Group Supply Chain and
Vendor Development department. As a result, these VDP vendors managed to reduce their cost
and wastage in a bid to contribute towards a greener environment. They were also able to
increase productivity and profits and are now able to become more competitive as a business
which can cater to both local and international partner
BHIC recognises the importance of maintaining good employee relations to help increase
overall productivity. BHIC remain fully committed to developing a quality workforce to serve
the needs of our customers. Talent development continues to be a strong focus in ensuring
internal bench strength remains resilient. Developing employees and investing in learning
technology is important while championing a diverse and inclusive workforce.
Conclusion

Shipbuilding is seen as a major player to ensure economic growth as it encompasses a wide

array of skills, services, SMEs and professional undertakings. But Malaysia is lagging behind in
the ability to capture a sizable portion of the world shipbuilding pie. There are adequate skills to
build various types of ships but skills alone are not enough to compete with shipbuilding giants
that do not rely on skill alone but on massive designs and knowledge. BHIC aim to achieve
long-term industrial competitiveness on a global basis through the transformation and innovation
of our ship building sector