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Mencast taps AI to ride out O&M downturn

Singapore

IF Mencast Holdings' chief executive gets his way, the small-cap offshore and marine-linked player could emerge as a pioneer in tapping artificial intelligence (AI) for its maintenance, repairs and overhaul (MRO) operations here as it seeks to ride out a prolonged downturn.

Towards this end, Mencast intends to go commercial with the digital twin technology that it helped to incubate sometime in the second half of the year, CEO Glenndle Sim told The Business Times in an exclusive interview.

A digital twin is a virtual model of a product - in the context of the O&M industry, this could be a ship, rig or other floating structures. The pairing of the virtual model with the physical ship allows for data analysis on ship components that in turn can be used for corrective actions to help extend the ship's life.

To be clear, the digital twin concept is not new and in fact, has been around for two decades. However, to reach full potential, it needs to be applied on suitable platforms. That's where Mencast's efforts fit in with the application of the technology in MRO works.

For starters, Mr Sim said that Mencast can tap the technology to procure and mobilise parts and resources required for maintenance and repair work ahead of vessel arrivals.

Mencast has teamed up with HTC Asia, a unit of the technology incubator Houston Technology Centre, to roll out the first MRO projects to be performed with the digital twin applications later this year. This comes after the Singapore-listed MRO specialist first embraced the technology in February this year through an in-house incubator programme backed by Spring Singapore.

The partners hold an exclusive licence to distribute this technology. In the longer term, Mr Sim envisaged that the partners can license the technology to offshore and shipping firms with the pitch that the technology can reap substantial savings in third-party costs in managing their assets. If this pulls through, the partners can look forward to a new source of income.

As the digital twin can pre-empt the need for spare parts and components way ahead of vessel arrivals, Mencast is also able to free up land used to store inventories.

Mr Sim said that plans are afoot to divest existing properties, particularly those amassed along with the acquisition of nine companies in the past seven years.

The planned divestment will generate cash that can go towards paring down less than S$200 million of bank loans. Like many industry players caught in the prolonged O&M downturn, Mencast still needs to count on continued support from lenders to stave off liquidity traps as a result of lower business volumes.

Mr Sim hopes to secure backing from principal lenders in the coming weeks for the company's debt restructuring to have additional financial runway to grow the new digital twin business.

Earlier this month, Mencast disclosed that non-current term loans amounting to about S$145.36 million at the group level and S$53.77 million at the company level have to be reclassified as current liabilities while its debt restructuring exercise is underway.

Mencast's losses for financial year 2017 widened to S$82 million from S$27 million a year ago on the back of a 14 per cent decline in revenue to S$52 million.

KGI Securities' analyst Joel Ng referred to Mencast's efforts to incubate new technologies as "a positive first step on a long road ahead where the company may serve as a platform for start-ups to test out ideas".

But shareholders need to manage their near-term expectations as such collaborations can take years to bear fruit, he added.