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KUALA LUMPUR: Tanjung Offshore Bhd, which has been in the limelight after a boardroom fight broke out early this year and more recently for making police reports over questionable deals, is introducing a four-pillar turnaround strategy, which will help the oil and gas (O&G) service provider return to profitability by the third quarter ending Sept 30, 2015 (3QFY15).

The four pillars involve focusing on the offshore support vessel (OSV) market, the brownfield O&G segment, maintenance and its wholly-owned subsidiary Gas Generators (M) Sdn Bhd (GasTec).

“Much [profit turnaround] still depends on the overall market situation such as a pick up in the O&G sector and whether we can weather the storm. But I think the situation will be better by early next year,” Tanjung Offshore group chief executive officer Rahman Shamsudin told reporters after the group’s annual general meeting yesterday.

“We will let the authorities investigate all the old issues (previous controversial deals). Our focus now is to turn around the company,” he said.

Tanjung Offshore executive deputy chairman Tan Sri Tan Kean Soon said the group is looking at several brownfield projects both locally and aboard to add to its RM500 million order book.

“We are keeping a close eye on new O&G discoveries in Malaysia, particularly Sarawak, Sabah and Terengganu,” he said.

It is also looking for opportunities in Indonesia, Vietnam and Myanmar.

“We have the right mix of services to grow with these new discoveries in undertaking onshore and offshore projects,” said Tan.

The group plans to inject some RM100 million in capital expenditure (capex) over the next few years for its brownfield segment activity.

In addition, Tanjung Offshore will strengthen its maintenance and services division by forming partnerships with international O&G players to undertake maintenance and services projects at the Refinery and Petrochemical Integrated Development (Rapid) project in Pengerang, Johor.

“We are in talks with major contractors from South Korea and Japan on possible joint venture opportunities,” said Tan, but nothing has been confirmed yet.

Despite noting that the O&G sector has been slowing down on the capex side, Tan said O&G firms did not cut down their operating expenditure (opex).

“They still need to spend on the maintenance of their safety equipment at their platforms. There is no way for them to compromise on this. We are eyeing these kinds of jobs,” he said.

“Most of our Petronas’ (Petroliam Nasional Bhd) assets out there are quite old assets and they need maintenance. As such, we are on the right track and in good position on this,” he said.

Additionally, Tanjung Offshore will re-enter the OSV market following the expiry of the three-year “non-compete clause”. Tanjung Offshore had sold off its OSV arm Tanjung Kapal Services Sdn Bhd to Equiti Nasional Bhd in 2012.

“It (the non-compete clause) will lapse in mid-July this year,” said Rahman.

“OSV (business) can be one of the group’s revenue contributions provided charter rates are favourable,” he said.

“Tanjung Offshore’s business activities are not heavily contingent on oil prices and the group is seeking out technologies that would enable lower operational costs,” he said.

On its subsidiary GasTec, Rahman said the group will look to expand into the mechanical and engineering segment.

For the first quarter ended March 31, 2015, Tanjung Offshore fell into the red, registering a net loss of RM1.97 million against a net profit of RM2.1 million a year ago.

On its eight-storey office building in Birmingham, the United Kingdom, Rahman said the group has yet to decide whether to sell or retain it for recurring income.

“Disposal could be one of the options. We can either dispose or add yield to it (the property) by undertaking a refurbishment of the property. But the question is what kind of refurbishment, be it a residential, a hostel or other form,” he said.

Rahman said the final decision will depend on the outcome of the investigations.

Over the past one year, the trading of Tanjung Offshore shares has been very volatile. Its share price was traded at a high of 61 sen on July 9 last year and plunged to a low of 30 sen on Dec 17 in the same year.

Since then, the stock has slowly recovered and closed two sen or 4.08% at 47 sen yesterday, for a market capitalisation of RM185.74 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. Go to www.theedgemarkets.com for more details on a company’s financial dashboard.

 

This article first appeared in The Edge Financial Daily, on June 26, 2015.

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