KUALA LUMPUR: Shipping and marine services provider EA Technique (M) Bhd, en route to listing on the Main Market of Bursa Malaysia next month, plans to diversify its business into upstream oil and gas (O&G) and bid for risk sharing contracts (RSCs) to develop marginal oilfields, said its managing director Datuk Abdul Hak Md Amin.
“Our diversification will begin after listing, tentatively from next year. We will focus on light-weight platform systems as well as Feed [front-end engineering design] services for the development of marginal oilfields in Malaysia,” he told The Edge Financial Daily in an interview.
He said one “cannot go wrong in the energy business”, as it has a high profit margin of 30% and above, compared to the marine services business with its 15%-20% profit margin. EA Technique’s pre-tax profit margin now stands at 18%.
On why the group is venturing into upstream O&G when global oil price is trending down, Abdul Hak reckoned that “growth is still there, with some margin that can be reaped”.
The recent fall in oil price has sparked concerns in the energy industry. As at last Friday, Brent futures tumbled to US$79.44 (RM265.93) per barrel, down 44.8% from US$115.06 on June 19.
Meanwhile, Abdul Hak said EA Technique is now deciding on the right partners to form a joint-venture company, in which it prefers to hold a majority stake, to bid for RSC projects.
EA Technique is one of 42 companies under Johor Corp’s Intrapreneur Development Scheme. It is controlled by Kulim (Malaysia) Bhd which has a 65.4% indirect stake held through Sindora Bhd. Abdul Hak currently owns a 24.6% stake, while his wife Datin Hamidah Omar has the remaining 10% interest. These shareholdings will be diluted once the group is listed. It is scheduled to launch its final listing prospectus today.
Abdul Hak said EA Technique previously attempted to get listed through a reverse takeover of a Main-Board company, but the plan was aborted due to “technical issues”.
According to a circular issued in June, EA Technique hopes to raise RM68.4 million through the issuance of 114 million shares, equivalent to 25.6% of its enlarged, issued and paid-up capital. The amount is based on the assumption of 60 sen per share, translating into a market capitalisation of RM302.4 million.
EA Technique said 43.9% of the listing proceeds will be used to pay bank borrowings, 42.7% for capital expenditure, and 6.7% each for working capital and listing expenses.
EA Technique currently operates 32 marine vessels, of which it owns 23, with nine chartered from external parties. Abdul Hak said proceeds from the listing will be used to gradually increase its vessels from 23 to 38.
 Abdul Hak said his company is also seeking to bid for risk sharing contracts to develop marginal oilfields. Photo by Patrick Goh |
“It (the increase of vessels) will be through acquisition and construction of new ones at our facility in Perak,” he said, adding that EA Technique will only add to its number of vessels when it has secured a contract.
The group’s order book currently stands at RM1 billion, including optional contract extensions of some RM297 million, which will “keep the group busy until 2025”.
The group is also actively bidding for various projects, worth a combined RM1 billion, which he expects “a positive outcome soon”.
As for outlook, Abdul Hak expects profit growth to double by the next financial year, anchored by outstanding order book of long-term contracts, strong utilisation of assets and new revenue streams.
For the financial year ended Dec 31, 2013 (FY13), EA Technique’s net profit tripled to RM56.9 million from RM18.91 million from FY12, while revenue grew 18% to RM121.12 million from RM102.72 million, on strong performance of port services and minor fabrication.
On a segmental basis, EA Technique’s marine transportation business contributed 59.3% to total revenue, followed by port services (37.2%) and minor fabrication (3.5%).
EA Technique’s main customers — Petronas Trading Corp Sdn Bhd and Petronas Maritime Services Sdn Bhd — formed the bulk of its revenue of 63% in FY13.
To limit the group’s reliance on a single customer for its businesses, it secured a RM260 million contract in July last year to build, operate and charter out six units of Z-Peller harbour tugboats to Northport (Malaysia) Bhd over a period of 10 years.
EA Technique is currently the largest local harbour tugboat operator in the country, providing services to five ports.
This article first appeared in The Edge Financial Daily, on November 24, 2014.