Malaysia offshore shipbuilder Nam Cheong and Singapore’s Marco Polo Marine have teamed up to establish a joint venture company in Malaysia.
The new company will be named SK Marco Polo Sdn Bhd Malaysia.
According to statements by Marco Polo and Nam Cheong, the Malaysian subsidiary’s principal activity will be vessel chartering.
Both partners said the setting up of the new subsidiary is not expected to have any material impact on their respective net tangible assets or earnings per share of the Company for the current financial year ending 30 Sept 2017.
No further details were shared on the new subsidiary or its expected activities.
Nam Cheong going concern
Nam Cheong, which describes itself as Malaysia’s largest OSV builder, has been in the spotlight since its auditors expressed doubt the company could continue as a going concern.
The auditor said drew attention to a note in the company’s financial statements which indicates that for the financial year ended 31 December 2016, the Group experienced a significant decrease in revenue and incurred a net loss of approximately RM42,771,000.
Nam Cheong has blamed the revenue drop on deferments the deliveries of vessels that had been requested by several customers. The current downturn in the oil and gas industry may continue to add pressure to the Group’s financial performance and its operating cash, the company said in its yearly report.
Commenting further, the auditor said that as at 31 December 2016, the Group’s loans and borrowings that were classified as current amounted to RM948,720,000 of which RM278,566,000 pertained to medium term notes that are due for repayment on 28 August 2017.
“These amounts exceeded the Group’s cash and cash equivalents of RM162,618,000 as at 31 December 2016. As stated in Note 4, these events or conditions, along with other matters as set forth in the note, indicate that a material uncertainty exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.”
Here is a definition of “going concern” as found on Investopedia: “Going concern is an accounting term for a company that has the resources needed to continue to operate indefinitely until a company provides evidence to the contrary, and this term also refers to a company’s ability to make enough money to stay afloat or avoid bankruptcy. If a business is not a going concern, it means the company has gone bankrupt and its assets were liquidated.”
Asked about its status by the Singapore stock exchange authorities, Nam Cheong last week said it “can continue as a going concern as the Group is in active and continuous discussions with its major lenders and other stakeholders.”
“The group is confident that it can restructure its existing commitments and continue as a going concern… The ongoing discussions with the major lenders and other stakeholders are of a sensitive nature and on-going. The company will make the necessary announcements when there are further developments,” Nam Cheong said on Friday.