After a long career in banking, Yong Jiunn Run, former head of commercial banking at CIMB Singapore, retired early at 58 due to job loss during the Covid-19 pandemic. Despite having ample free time, he felt unfulfilled by golf and socialising with other retirees. Seeking a more meaningful pursuit, Yong accepted an offer from Chua Beng Yong, chairman and founder of Beng Kuang Marine BEZ , to become the company’s CEO. “I lent money to the company and even took up shares to prove my commitment. I took a risk,” Yong says in a recent interview with The Edge Singapore.
Since Yong became CEO in 2021, he has markedly transformed the company and boosted its performance. Starting this year, shares in Beng Kuang have nearly doubled to 26 cents. Although they remain below the 2009 peak of $1.52, Yong’s hard work to transform the company is evident and he is focused on further improving its financial resilience.
“When I came in, I conducted a culture transformation to optimise talent. I created a lot of leaders, so there will be more accountability. I turned every business unit into a performance-based reward. I saw morale transformed,” says Yong, who adds that he is a strong believer in employee engagement and that the company’s success should be attributed to the support of the employees. “If the employees are happy, they will stay and strive.”
Yong’s “corporatisation” approach, influenced by his banking background, emphasises rewarding employees generously during company successes. This strategy aims to retain talent and drive transformation, helping the company stay competitive.
Founded in 1994, Beng Kuang is celebrating its 30th anniversary this year. Listed on SASDAQ of the Singapore Exchange S68 (SGX) in 2004 the transferred onto the Mainboard in 2007, the company has faced challenges like fluctuating oil prices and the pandemic. Under Yong’s leadership, Beng Kuang has streamlined its operations by cutting its business divisions from three to two.
Today, Beng Kuang is the leading provider of corrosion prevention services to shipyards in Singapore. Given the significant corrosion challenges posed by seawater’s high salt content, these services are essential for cutting maintenance costs and prolonging the service life of vessels.
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The company provides comprehensive corrosion protection services for the marine and offshore energy sectors, including surface preparation and protective coatings. Its strong track record has made it the preferred contractor for several prominent shipyards in Singapore and Batam, Indonesia. Additionally, in its infrastructure engineering division, Beng Kuang offers services such as repairing and maintaining floating production platforms, fabricating marine structures and producing custom pedestal cranes and deck equipment.
The infrastructure engineering division also handles complex engineering and construction projects, including semi-submersible barges, patrol vessels, crane barges, tug boats and cargo barges. The company operates a 13.8ha yard on the eastern side of Batam, a portion of the 32.8ha acquired in 2007 for $1.87 million. Although Yong initially aimed to develop a shipping arm, the business faced challenges due to the oil and gas downturn and insufficient scale, leading to its eventual closure and the sale of most of the land.
Since then, the company has not only streamlined its businesses but disposed off loss-making ones too, as it transitions into a new era. Yong says: “Several businesses, such as the livestock carrier one, were bleeding and cost-inefficient. They could not create value and there was no chance for Beng Kuang to emerge as a key player in the market, be competitive and make a difference.”
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Yong is committed to revitalising Beng Kuang and removing it from the SGX Watch-list, where it was placed in June 2023 due to three years of financial losses. However, signs of recovery are already visible — in FY2023 ended December 2023, Beng Kuang reported a $3.4 million profit, reversing the $8.6 million loss from the previous year. Additionally, the company no longer incurs losses from discontinued operations.
The stronger bottom line resulted from revenue increasing by 33.9% y-o-y to $79.2 million due to growth in both business divisions. The infrastructure engineering division saw the largest revenue increase, up 4% y-o-y to $57 million. This growth is primarily due to expanded business in the oil and gas sector, particularly in repairs and maintenance for floating, production, storage and offloading (FPSO) and floating, storage and offloading (FSO) units. Additionally, there was an increase in project management services for both existing and new builds.
Yong envisions this division becoming more service-oriented and asset-light, with the Batam yard as its sole asset. “Being asset-light will help the company be more nimble and agile. If the industry turns, it will be easier for us to extricate and rebound. We won’t suffer like we did during the pandemic and the oil and gas downturn,” he adds.
Revenue from the corrosion prevention division, which is mostly recurring, rose 9% to $22 million. Although demand for services in Singapore decreased in the second half of FY2023, a significant revenue increase from Batam operations offset this.
Despite challenges, Beng Kuang survived when many competitors did not. Yong points out that the pandemic led to the closure of several rivals, creating a favourable opportunity for Beng Kuang to capture a larger market share.
Still, Yong remains cautiously optimistic. “Although we are positive now, it doesn’t mean that it is sustainable. We need to seek out and build new revenue engines. We have to remain capex light and we will not ‘buy’ our profit anymore.”
Shareholders have recognised Beng Kuang’s efforts, especially with the company’s shares doubling from the beginning of the year to the end of July. The most recent 1HFY2024 results are even more encouraging. Profit after tax reached $8.6 million, a turnaround from a loss of $854,000 the previous year. Revenue also surged 88.1% y-o-y to $59.9 million.
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The revenue growth was driven by the infrastructure engineering division, which continues to be the main revenue contributor, increasing by 141.7% y-o-y to $50.11 million and accounting for 83.6% of total revenue. This growth was partially offset by an 11.5% y-o-y decline in the corrosion prevention division, which generated $8.2 million due to the company’s exit from the water distribution business. 1HFY2024 also saw the gross profit margin increase by 9.2 percentage points to 35.5%, which helped gross profit surge by 153.4% to $21.3 million.
Beng Kuang has proposed issuing three-year bonus warrants to reward shareholders for loyalty. Shareholders will receive three warrants for every 10 existing shares they hold. Each warrant will allow the purchase of one new ordinary share at an exercise price of 22 cents during the exercise period.
Maybank Securities analyst Jarick Seet remains optimistic about Beng Kuang, maintaining his “buy” recommendation but adjusting his target price to 29 cents from 47 cents. Although core earnings fell short due to higher-than-expected administrative expenses, Seet is encouraged by the FPSO upcycle and a promising 2HFY2024. He also sees potential in a possible Batam island sale, as the group looks to become more asset-light.
This outlook aligns with the company’s broader strategy, including its growth plan “BKM 2.0,” which aims to strengthen operations and financial resilience to seize future opportunities. Yong underscores this approach: “We don’t want to miss the boat again, even though we build boats. We want to be on board and ride it.”
