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This article first appeared in The Edge Financial Daily, on April 20, 2016.

 

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SHAH ALAM: OGPC Sdn Bhd, which Dagang NeXchange Bhd (DNeX) plans to acquire using proceeds from its rights issue, managed to grow its profit last year despite aggressive cuts in capital expenditure by oil giants. For the financial year ending Dec 31, 2016 (FY16), managing director Azman Karim said OGPC is looking at a top-line growth of 5% to 10%.

OCPG is a leading provider of equipment and services for the oil and gas (O&G), petrochemical and power industries. In FY15, its net profit grew by RM3 million to RM22 million from the prior year, while revenue jumped by RM22 million to RM101 million. Azman said that as OGPC does more maintenance work, it looked for more maintenance, repair and overhaul jobs in brownfield projects when oil companies stopped issuing new projects.

“When prices drop, a lot of operating companies put more emphasis on maintenance and repair, and minor upgrades. OGPC Group is able to capture those opportunities because in a low-price environment, the opportunities [tend to command] higher margins,” he said, adding that the company’s current order book is around RM40 million, which averages about RM10 million a month. At this rate, OGPC will manage to grow its revenue this year.

Once it becomes a wholly-owned subsidiary of DNeX, OGPC can more than double the listed company’s top and bottom lines, provided that the group maintains its numbers achieved last year. DNeX’s audited net profit in FY15 was RM11.23 million, on revenue of RM95.55 million.

DNeX will hold an extraordinary general meeting on April  27 to seek shareholders’ approval for its purchase of a 30% stake in Ping Petroleum Ltd, a 50%-owner of the Anasuria Cluster in the North Sea.

Azman implied that DNeX’s acquisition of OGPC (along with a 52% stake in OGPC O&G Sdn Bhd) creates a symbiotic relationship: DNeX gets to diversify its income stream from its information technology business and instantly bolster its bottom line, while OGPC gets to tap the parent company’s group managing director Zainal Abidin Abd Jalil’s experience with international O&G companies.

“The Middle East is not a market that we are familiar with. We may need Zainal’s advice and plan,” said Azman after an event to commemorate OGPC’s receipt of the Integrated Management System Award from NIOSH Certification Sdn Bhd. Under the award, OGPC’s integrated management system has been certified to comply with Quality Management System ISO 9001, Environmental Management System ISO 14001, and Occupational Health and Safety Management System OHSAS 18001. The award is valid for three years.

“These certificates are recognised globally, which will help us when we venture overseas,” Azman said.

Zainal Abidin, who was present at the event, did not want to comment on The Edge Financial Daily’s Feb 16 report on the company being the front runner to obtain the government contract to implement the vehicle entry permit (VEP) between Johor and Singapore.

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