KUALA LUMPUR: Salcon Bhd announced that Kunci Sempurna Sdn Bhd (KSSB) will be acquiring a 51% stake in its subsidiary, Salcon Petroleum Services Sdn Bhd (SPSSB), which will allow the two companies to collaborate in oil and gas (O&G) and likely pave the way for Salcon’s venture into the O&G sector.

In a filing yesterday, Salcon (fundamental: 1.65; valuation: 1.8) said SPSSB had increased its issued and paid-up share capital from RM2 to RM100,000 by way of allotment of an additional 99,998 shares of RM1 each, which saw 51,000 shares allotted to KSSB for RM51,000, cash.

KSSB, incorporated on March 18 as a private limited company, is owned by Syed Feisal Alhady (99%) and Rizalmanudin Sukri (1%) and is principally engaged in investment holding activities, according to Salcon’s filing.

The water and waste water engineering-focused Salcon, meanwhile, gets the remainder of 48,998 shares for RM48,998, which effectively brings its 100% shareholding in SPSSB down to 49% with 49,000 shares.

“The reduction represents an opportunity for Salcon to work with the strategic partner, i.e. KSSB, which has the expertise and experience in the oil and gas industry,” said Salcon.

With the reduction in Salcon’s stake, SPSSB ceases to be a subsidiary and becomes an associated company of Salcon.

Salcon said the exercise will not have any material effects on its earnings per share, net assets per share and gearing for the financial year ending Dec 31, 2015.

To recap, it was reported in June that Salcon would be sitting on a cash pile of RM310 million after divesting its water concessions in China and was on the lookout for good investments.

At the time, the company had cash of RM270 million after having completed the disposal of eight of nine water concessions in China, with the last concession in Shandong expected to be resolved by the third quarter, bringing in another RM40 million cash.

Salcon closed two sen or 2.7% lower at 72 sen, bringing its market capitalisation to RM499.24 million.

The Edge Research's fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.

This article first appeared in digitaledge Daily, on August 11, 2015.