This article first appeared in The Edge Financial Daily on February 11, 2020

KUALA LUMPUR: Eversendai Corp Bhd founder and major shareholder Tan Sri AK Nathan Elumalay plans to inject his private liftboat company Vahana Offshore Sdn Bhd into the oil and gas (O&G) and construction group to improve its bottom line.

However, he did not disclose Vahana Offshore’s purchase price, saying it is still evaluated by an independent valuer and that the final amount will be made at an arm’s length. The purchase price will be settled via issuing new redeemable convertible preference shares (RCPS) of Eversendai based on terms and conditions to be mutually agreed between the parties.

Nathan is Eversendai’s largest shareholder, with a 71.11% stake via his private investment vehicle Vahana Holdings Sdn Bhd (VHSB) as at April 12, 2019.

In a filing with Bursa Malaysia yesterday, Eversendai said it had received a letter of offer from VHSB for the group to acquire Vahana Offshore, which owns a self-propelled jack-up barge or liftboat named Vahana Aryan, used for maintenance, workover, service of wells, hook-up, commissioning and decommissioning of offshore platforms in the O&G industry.

At yesterday’s press conference to announce the corporate exercise, Nathan, who is also Eversendai executive chairman and group managing director, said a recurring income from Vahana Offshore will help the group boost earnings, in turn bolstering shareholders’ confidence. He expects the liftboat business to account for 20% of Eversendai’s net profit for the financial year ending Dec 31, 2020. “I think this is the best thing to do in the group’s interest to improve Eversendai’s bottom line and help its share price,” he said.

Vahana Offshore is also building a second liftboat named Vahana Arjun, targeted to be completed by early 2021. The liftboat built by Eversendai is currently 40% completed.

“We had to put [constructing Vahana Arjun] on hold for some time due to funding issues. But with the funding now in progress, we had restarted the project. We expect to complete the second vessel in early 2021, and for that vessel to go to work by June 2021,” Nathan said.

“Once the second vessel is completed, we expect its revenue to be registered in Eversendai from the second half of 2021. We had looked at the numbers and they look very healthy and attractive going forward.”

The construction of the two liftboats was commissioned to Eversendai in May 2014 in a contract worth RM580 million. Vahana Aryan and Vahana Arjun were scheduled to be delivered in February and May 2016 respectively. Vahana Aryan was eventually completed in early 2018.

Nathan noted the cost of constructing Vahana Aryan is in the region of US$102 million (RM423.3 million), and Vahana Arjun at around US$100 million.

He said Vahana Aryan and Vahana Arjun had secured five-year charter contracts with Zamil Offshore to work in Saudi Aramco projects, starting in June 2020 and June 2021 respectively, without disclosing the contracts’ values.

With the proposed injection of Vahana Offshore, Nathan said Eversendai will be able to diversify its existing businesses to include one with a stable recurring income.

It will also eliminate potential conflicts of interest, cross borrowings, financial exposures and related party transactions involving the subsidiaries and Eversendai.

Eversendai’s board of directors has 30 days to consider the proposal — which Nathan, and his son Narishnath Nathan, also a director in the group, will abstain from voting on due to conflicts of interest.

Eversendai shares slipped 0.5 sen or 1.41% yesterday to 35 sen, with a market capitalisation of RM273.35 million. The stock has declined 41% in the past 12 months, in tandem with the group’s declining profit performance.

For the nine months ended Sept 30, 2019, the group’s net profit more than halved to RM20.98 million from RM50.50 million a year ago. Its revenue retreated to RM1.19 billion from RM1.21 billion.

The weaker performance was primarily due to a loss incurred by its mechanical fabrication, installation and modularisation segment, which Eversendai blamed on its Ras Al Khaimah fabrication yard in the United Arab Emirates being underutilised, owing to a delay in the timing of project awards.

As at February 2020, Eversendai has a tender book of more than RM10 billion and an order book at RM1.87 billion.