Icon Offshore to acquire GMV’s OSV stakes?

-A +A

ICON OFFSHORE BHD is planning asset acquisitions to expand its offshore support vessel (OSV) fleet. Its controlling shareholder Ekuiti Nasional Bhd (Ekuinas) is believed to be the mastermind behind the plan, say sources familiar with the matter.

According to sources, Icon Offshore will acquire stakes held by Global Maritime Ventures Bhd (GMV) in several OSVs that the latter co-owns with multiple local parties.

“GMV is basically letting go of its stakes because it sees that it is time for it to monetise its investments in the offshore service business,” a source says, adding that the deal may be done via a share swap.

At press time, Icon Offshore was unable to comment on queries made by The Edge on the matter. Its 42%-shareholder Ekuinas, however, says it “is not aware of any such plans”.

GMV, a subsidiary of Bank Pembangunan Malaysia Bhd, is a marine venture capital investment holding company incorporated in 1993 to accelerate the development of the country’s maritime industry.

A check on its website reveals that GMV has four joint-venture partners — Alam Maritim (M) Sdn Bhd (a wholly-owned subsidiary of Alam Maritim Resources Bhd), Jasa Merin (M) Sdn Bhd (a 70%-owned unit of SILK Holdings Bhd), Offshoreworks Sdn Bhd and Efogen Sdn Bhd (in which PDZ Bhd recently terminated its plan to acquire a 20% stake).

According to GMV’s 2012 annual report, the group has a 40% interest in two of Alam Maritim’s anchor handling tug and supply (AHTS) vessels and one support maintenance vessel as well as a 49% interest in four of Jasa Merin’s AHTS vessels.

The group also has a 49% interest in one of Efogen’s AHTS vessels. However, GMV did not state its interest in Offshoreworks.

“Should Icon Offshore acquire GMV’s JV stakes, it will co-own these OSVs and will be able to garner an additional RM100 million in net profit annually from the stakes it will hold,” says the source.

However, it is unclear if the OSVs that GMV co-owns are bound to chartered contracts.

Apart from these four JVs, GMV has a 70% stake in three of Wawasan Shipping Sdn Bhd’s chemical and product tankers and a 49% interest in three of Global Carriers Bhd’s product tankers. Information on its interest in Regional Maritime Services Sdn Bhd is not available.

It also has a 60% interest in Gagasan Carriers Sdn Bhd’s two product tankers and a 40% interest in one of its chemical tankers.

Icon Offshore reported a net profit of RM7.97 million for its second quarter ended June 30, 2014, a sharp rise from a net profit of RM1.98 million a year earlier. However, revenue came in lower at RM81.97 million, compared with RM90.66 million the previous year.

Icon Offshore says the drop in revenue was primarily because vessels were disposed of in the last 12 months and had yet to be replaced under its fleet rejuvenation programme.

For FY2013, the group reported a net profit of RM113.6 million on the back of RM334.86 million in revenue. This was against a pro forma net profit of RM37.62 million on the back of RM297.7 million in revenue.

Meanwhile, GMV has two investee companies, namely OSV operator Syarikat Borcos Shipping Sdn Bhd and Orkim Sdn Bhd, which is involved in product tankers.

It is worth noting that Ekuinas had announced in August that it was investing RM346.3 million to acquire up to 95.5% interest in Orkim, one of Malaysia’s leading clean petroleum product tanker companies.

Currently, Icon Offshore owns 33 vessels and has identified seven more to be acquired by 2016. Should the group acquire GMV’s stakes and co-own the OSVs, it would add at least another 17 vessels.

Icon Offshore’s share price has been trading below its initial public offering price of RM1.85 since it was listed on Bursa Malaysia on June 25. The stock closed at RM1.42 last Friday — 23.2% below its IPO price — giving it a market capitalisaion of RM1.65 billion.

Icon Offshore’s aggressive expansion may be expected to be earnings-accretive as more vessels would bring in more profits.

But some investors find that its earnings risks are also growing in tandem with the expansion plan as Icon Offshore specialises only in OSVs. This raises concerns on how Icon Offshore will mitigate the impact of a soft OSV market.

The last thing that investors would want to see is a repeat of  the circumstances at Tanjung Offshore Bhd, the former owner of some OSVs in Icon Offshore’s fleet. The company was financially stressed in 2008 when the global financial crisis halted its oil exploration and production activities. It then divested its assets to Ekuinas.

This article first appeared in The Edge Malaysia Weekly, on October 06-12, 2014.