KUALA LUMPUR (June 13): Shares in Boustead Heavy Industries Corp Bhd (KL:BHIC) surged to their highest in six months, after the defence contractor secured a RM1.1 billion service contract.

BHIC climbed as much as 23% or 11 sen to 59 sen on Thursday morning, its highest since Dec 20, 2023. The stock pared some gains to close at 53 sen, still up five sen or 10.4%, valuing the company at over RM296 million on Bursa Malaysia.

Trading volume totalled 1.99 million shares, more than 19 times the 200-day moving average.

No institutional analysts cover the stock.

BHIC shares have risen 10.4% since the beginning of the year, following the disposal of the troubled Boustead Naval Shipyard Sdn Bhd (BNS), now Lumut Naval Shipyard Sdn Bhd, to the government as part of a restructuring.

The Armed Forces Fund Board owns 64.99% of BHIC via Boustead Holdings Bhd (KL:BSTEAD).

On Wednesday (June 12), BHIC announced that its wholly owned subsidiary BHIC Submarine Engineering Services Sdn Bhd secured a RM1.1 billion contract from the Ministry of Defence to provide in-service support for the Royal Malaysian Navy’s Prime Minister-class submarines.

A formal contract between the government and BHIC Submarine Engineering will be executed at a later date, said BHIC in a filing with Bursa Malaysia on Wednesday. The contract is anticipated to positively impact the group’s earnings for the financial year ending Dec 31, 2024 (FY2024), BHIC noted.

Loss-making BHIC has reported net losses for the third straight quarter.

The group reported a net loss of RM6.67 million for the first quarter of financial year 2024 (1QFY2024), after posting a net loss of RM6.5 million for the same period in the previous year (1QFY2023), due to higher operating costs and lower contributions from joint venture companies, amid lower customer demand.

However, revenue for the quarter rose to RM19.15 million, from RM6.36 million previously, attributed to positive variations in the milestones achieved for submarine contracts.

Last month, BHIC sold its 20.77% stake in BNS to the Ministry of Finance (MOF) for RM1, giving the MOF full control of BNS, following a long-delayed delivery of six littoral combat ships for the Malaysian navy.

Previously, the MOF, through Ocean Sunshine Bhd, held a 79.23% stake in BNS.

Initially, the disposal was set for completion by Oct 3, 2023, but it was extended by nearly seven months and finalised in May.

This stake sale is part of the government’s strategy to assume full control of the RM9.13 billion littoral combat ship (LCS) project, which BNS failed to deliver on time and at the initially budgeted cost. Additionally, it aims to settle the repayment of RM383.94 million, or any other amounts BNS owes to BHIC.