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Quarterly Report For The Financial Period Ended 31 December 2017

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Unaudited Condensed Consolidated Statement Of Profit Or Loss
For The Quarter And Year-To-Date Ended 31 December 2017

 Income Statement

Condensed Consolidated Statement Of Financial Position
As At 31 December 2017

Financial Position

Review of performance of the Company and its principal subsidiaries

(a) Financial review for current quarter and financial year to date

Review of performance

4Q 2017 vs 4Q 2016

(I) Operating Revenue

The revenue has increased 6% in 4Q 2017 compared to 4Q 2016. The revenue for both periods derived mainly from ship charter division.

Despite the main revenue was derived from ship charter division, the revenue from ship repair division has a significant increase in 4Q 2017 compared to 4Q 2016 as the Group has entered into few ship repairing contracts.

The utilization rate for ship charter division in 4Q 2017 was similar to 3Q 2017 as a result of the extension on the existing charter.

(II) Operating expenses

The operating expenses have significantly decreased by 75% mainly due to the fair value adjustment of RM30.5 million for few vessels in 4Q 2016.

FY 2017 vs FY 2016

(a) Shipbuilding Division

The operating revenue of shipbuilding division has decreased 64% in FY2017 compared to FY2016 mainly due to sale of one (1) harbour tug during the year. There are two (2) offshore support vessels sold in FY2016 amounted to RM36.0 million. The Group intends to sell another harbour tug and enter into more ship repair contracts in FY2018.

The operating expenses decreased by 15% mainly due to the fair value adjustment for few vessels in FY2016. The operating expenses in 2017 consist of mainly forex loss on the disposal of a vessel and high fixed overhead expenses (depreciation and amortization on non-current assets).

Commentary on prospects

Based on industry analyst reports, oil prices will hover around USD50s to USD60s per barrel in 2018 as crude prices have rallied on the extension of OPEC and non-OPEC members' production cuts, and the market could refocus on the revival of US shale gas production.

According to Kenanga research, tendering activities have been on the rise and oil majors are reviewing projects suggesting that they are relatively more upbeat on the upstream sector following the stabilisation of oil prices.

Petronas' Activity Outlook Report 2018-2020 also showed most upstream sub-segments' activities in 2018 were revised higher compared to the previous report. Research indicates that the upward revision could be due to the delayed work orders last year being pushed to 2018 which may potentially lead to better contract flows and further provide order-book replenishment opportunities for the supporting sectors.

The Group will continue its emphasis on its core activities of ship building, ship charter and ship repair. The Group’s shipbuilding division will be looking towards building vessels which have a niche market as well as enhancing its docking (ship repair) facilities, whilst continuous efforts will be taken towards optimising capacity utilisation of the Group’s vessels. With the ongoing initiatives in sustainable cost rationalisation and exposures, we believe the Group will be well positioned to tide over the current business challenges.

Barring any unforeseen circumstances or events, The Board is optimistic that demand for offshore marine support vessels will improve with further increase expenditure in offshore oil field development and maintenance work by the oil majors. The outlook seems to be improving in anticipation of a shipping recovery.