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Zainal: The proposed purchase of OGPC units is of mutual benefit to both companies, as the OGPC group would also be able to leverage DNex’s status as a public listed entity to gain access to the capital market. Photo by Abdul Ghani Ismail

KUALA LUMPUR: The proposed acquisition of oil and gas (O&G) units OGPC Sdn Bhd and OGPC O&G Sdn Bhd is necessary for Dagang Nexchange Bhd — formerly Time Engineering Bhd — to diversify its revenue stream, said its newly appointed group managing director Zainal Abidin Abd Jalil.

Zainal said the proposed purchase of the units for RM203 million is of mutual benefit to both companies, as the OGPC group would also be able to leverage Dagang Nexchange’s (DNex) status as a public listed entity to gain access to the capital market.

“It’s a privately held company which has reached its critical point — it’s difficult for it to upscale on its own. I think it’s a bold and calculated move that benefits shareholders since OGPC has the track record and expertise ... the key is that we would be a niche player in the market and not stray too far from OGPC’s core competencies,” he said in an interview with The Edge Financial Daily.

Zainal said once the proposed acquisition is completed, DNex intends to scale up the business and enter the regional market.

“We would like to scale up by offering additional services, products and equipment to both the upstream and downstream. More importantly, we want to become a regional player.

“OGPC would be asset light, but focused on technical know-how and competency. We’re not interested in acquiring capital-expenditure-heavy assets,” he added.

Zainal said one way for OGPC to expand outside Malaysia is by providing support services for Petroliam Nasional Bhd’s (Petronas) overseas ventures.

OGPC is a bumiputera group licensed by Petronas as an approved supplier of O&G equipment and services, and is principally involved in the provision of engineering and technical support services. It is also a supplier and service provider for specialised equipment and parts.

OGPC Sdn Bhd’s shareholders are Azman Karim (52.5%), Abdul Manaf Shariff (17.5%) and Khoo Kok Seng (30%). The company has almost zero gearing with a cash pile of about RM50 million pre-acquisition.

The acquisition of OGPC was first proposed by DNex in June this year, and is expected to be completed by early next year.

On funding the group’s expansion plans, Zainal said the company would need to take on fundraising exercises — not just for the proposed acquisition, but also a possible rights issue in the future to raise capital for any future funding needs.

On the group’s core information technology business, Dagang Net Technologies Sdn Bhd, Zainal said other than scaling up he is also looking at opportunities to provide IT solutions to the O&G industry.

He noted that working with the government with the implementation of the goods and services tax is also an option, but the main priority for DNex next year is the expansion of OGPC’s business in Malaysia and to make inroads into foreign markets.

“I hope by 2015, OGPC is better and larger in terms of business reach within the O&G industry, and hopefully also supporting other parts of the economy like the oleochemical and power industries in terms of equipment,” he said, adding that the possibility of diversifying into other industries would not be ruled out.

For the first half ended June 30, 2014 (1HFY14) DNex more than doubled its net profit to RM5.5 million from RM2.3 million in 1HFY13. Revenue, however, dipped to RM39.2 million, from RM45.4 million a year ago.

The stock closed 0.5 sen down to 36 sen last Friday, bringing its market capitalisation to RM282.96 million.


This article first appeared in The Edge Financial Daily, on September 29, 2014.

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