Oilcorp Bhd raised some eyebrows in the market recently when it disposed of a major asset to Ramunia Bhd on the same day it was delisted from the Main Market of Bursa Malaysia.
According to a filing with Bursa by Ramunia, Oilcorp’s 51% indirectly owned subisidiary Oilfab Sdn Bhd had accepted a letter of offer from Ramunia to acquire its Pulau Indah fabrication yard assets located on it for RM83.8 million on Jan 25.
According to Ramunia, RM80 million of the purchase price would be satisfied via the issuance of 156.86 million new Ramunia shares to Oilfab at an issue price of 51 sen each while RM3.8 million would be paid for in cash.
What is interesting about the deal is that Oilcorp was also delisted from Bursa on the same day. This certainly raised questions on the timing of the deal. Could the deal have saved Oilcorp from delisting had it sold the asset earlier?
In addition, the announcement of the proposal was made by Ramunia to Bursa.
While Oilcorp is not required to announce its corporate exercises on Bursa after it was delisted, it raises some questions as minority shareholders could be in the dark.
Questions minority shareholders could have about the deal include whether Oilcorp is getting a good price for it and whether it will help rejuvenate the company.
According to a subsequent announcement by Ramunia on Jan 28, the purchase consideration of RM83.8 million was arrived at based on the market value of the assets as at Dec 6, 2010 of RM86 million ascribed by an independent valuer appointed by Ramunia, and a discount to the asset’s net book value of RM97.69 million as at Dec 31, 2009. That suggests a RM13.89 million haircut on the assets although it is unclear if Oilcorp had written down its value further in 2010.
Oilcorp posted a huge loss of RM445.65 million in FY Dec 31, 2009 after making a total of RM417.91 million in provisions, impairments, debt write-downs and other one-off items, according to its audited accounts posted on Bursa’s website.
For the 9MFY10 ended Sept 30, Oilcorp posted a net loss of RM38.37 million on the back of RM60.12 million in revenue. The company has borrowings amounting to RM328.45 million while cash and bank balances amounted to RM1.99 million.
Under the agreement, Oilfab would place out 50% of the 78.43 million new Ramunia shares to specified placees at the same issue price, upon which Ramunia shall issue the placement shares directly to such placees upon completion of the SPA.
Ramunia added that the issue price of 51 sen was at a 20% discount to the five-day volume-weighted average market price to be calculated up the date of the SPA, whichever is lower. The issues price is also at 42% discount to Ramunia’s closing price of 72.5 sen yesterday.
According to Ramunia, the purchase consideration would allow it to preserve its existing cash reserves for working capital required for upcoming projects.
The acquisition may be a boon for Ramunia which found itself without a core business when it sold off its fabrication yard in Teluk Ramunia for RM515 million cash to Sime Darby Bhd last year.
It was cash-rich after the disposal and was on the lookout to acquire other yards.
Ramunia recently confirmed that it is in talks to acquire Syarikat Borcos Shipping Sdn Bhd which has a common shareholder in pilgrim fund Lembaga Tabung Haji (LTH). LTH holds 84% and 25.17% stakes in Borcos and Ramunia respectively.
It has also signed a deal with Pleasant Engineering Sdn Bhd to utilise the latter’s yard, and expects to commence operations at the Pulau Indah fabrication yard next month via a tenancy agreement with Oilcorp.
For FY10 ended Oct 31, Ramunia posted a net profit of RM65.79 million from RM34.86 million in revenue. For FY09, it had suffered a net loss of RM52.72 million on the back of RM296.67 million in revenue.
Its cash and bank balances stood at RM27.8 million with an additional RM103.75 million in short terms deposits, and no bank borrowings.
With such a big pile of cash, it would be interesting to see what acquisition is next on the cards for Ramunia.
The stock gained 7.5 sen yesterday to finish at 72.5 sen with 89.35 million shares traded. - by Max Koh, theedgemalaysia.com.
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