BAN’s ratings affirmation reflect the company’s good competitive position in the area of providing marine transportation, tanker operations and support services for the offshore oil and gas industry. Its long-term contracts with leading oil and gas multinationals, high utilization rates of vessels, and commendable health, safety and environmental operating track record which are critical in ensuring contract renewals, contribute to the company’s continued dominance in servicing this segment of the oil and gas sector. BAN’s growth prospects are influenced by the oil and gas sector development.

Being dependent on the oil and gas sector specifically offshore exploration and production (E&P) activities, the medium term outlook for the company appears positive given the massive investments coming onstream in the next three to five years. These offshore activities require marine transportation of goods such as heavy equipment, machinery and spare parts to support the offshore oil and gas production and exploration. Furthermore, offshore production platforms also require standby safety vessels as the platforms are susceptible to hazards like oil spill and fire, as well as accommodation workboats, thus providing demand for BAN’s services. Lower oil and gas prices in the past had deferred some E&P activities, but the impact on BAN’s operations had been proven negligible.

BAN is currently the leading operator of offshore support vessels in Malaysia with its fleet of 37 vessels. Industry competition is relatively low due to four major factors; BAN’s business segment is a niche market which is not strategically-sized to warrant the involvement of major international shipping companies, oil companies tend to favour local companies with proven abilities when offering new contracts, economies of scale accorded by the company’s fleet size and the competitive advantage of being one of the few Malaysian companies with strong rapport with PETRONAS and established track record. Contracts secured by BAN averaged between three to five years with renewal options and are with multinational oil companies such as PETRONAS Carigali, Sarawak Shell, Shell Gas Eastern and Esso Production Malaysia. Likelihood of contract renewals is high given the group’s good safety track record, and well-maintained and specialized vessels, predicated on sustained recovery in oil prices. Fleet expansion is substantially funded by debt against firm charter contracts.

BAN’s FY2002 revenue dropped slightly by 2.3% to RM231.3 million from RM236.8 million due to lower income generated from agency vessels. However, pre-tax profit grew by 3.7% due to the continued downward trend of the company’s interest expense and operating margin remained adequate to cushion BAN from unexpected increases in future operating costs. Cash flow protection measures remained strong, underpinned by the stable stream of charter proceeds and the good payment record of its clients. The gradual reduction of debt coupled with accumulation of retained earnings have helped to reduce BAN’s debt leverage from 6.75 times in FY1998 to 0.7 time in FY2002. Financial flexibility is good, backed by the group’s healthy recurring cash flows, unutilized credit facility and availability of unencumbered vessels.