Friday 29 Mar 2024
By
main news image

This article first appeared in The Edge Financial Daily on July 11, 2019

KUALA LUMPUR: Dagang Nexchange Bhd (DNeX) wants to sell its 30% stake in Bermuda-incorporated oil and gas (O&G) associate Ping Petroleum Ltd for at least RM250 million.

The amount would be at around 25% premium to Ping’s book value of RM200.9 million on DNeX’s balance sheet as at Dec 31 last year, and nearly six times more than its initial investment of US$10 million (RM42.05 million at the time) for the stake in Ping.

DNeX executive deputy chairman Datuk Samsul Husin (pic) said while the group is committed to monetising its stake, it must be at a valuation that is agreeable to its board of directors.

“We are looking at any amount above RM250 million. In terms of timing for the sale, we are looking at either this year or the next. The window for us to do this is while oil prices are stable at current levels. So, we hope that a buyer can be found as soon as possible,” Samsul told The Edge Financial Daily in an interview yesterday.

Brent crude was trading at a low of US$47 per barrel when DNeX acquired the Ping stake in September 2015, which represented an ideal opportunity for the former to buy producing assets with development potential. At press time, oil prices were trading at US$65 per barrel.

Samsul said if the sale goes through, the group is looking to pay a special dividend to its shareholders from the proceeds. “We are looking to return a portion of the proceeds back to our shareholders as dividends. The rest will be used for future expansion of our businesses, which include acquisitions,” he said.

Asked what kind of companies DNeX would be looking to acquire, Samsul said they would be those that can boost the group’s information technology and system integration businesses.

It was reported that DNeX is one of the front runners to buy into Theta Edge Bhd, an IT company owned by Lembaga Tabung Haji. Theta Edge’s market value stood at RM40.75 million yesterday.

The Edge Malaysia weekly had reported last month, quoting a source close to the matter, that Ping — an O&G outfit that focuses on shallow water offshore production and development — had been put up for sale by its shareholders.

While DNeX has a 30% stake in Ping, which has offices in the UK and Malaysia, the rest of the company’s shares are controlled by its founding directors. According to its website, Ping’s founders include its chairman David Roy Phillips, chief executive officer Ning Zhang and chief operating officer Paul Baltensperger, all of whom were former technical and management executives of Newfield Exploration Co.

Samsul said a reason why the group wants to monetise its stake in Ping is that at 30%, it does not have control of the company and cannot fully consolidate its earnings at the group level.

Ping contributed RM22 million to DNeX’s net profit in the financial year ended Dec 31, 2018, down slightly from RM22.2 million in the previous year.

However, the sale does not mark DNeX’s exit from the O&G sector as it still wholly-owns the OGPC Group, which provides equipment and services for the O&G, petrochemical and power industries, and its subsidiary DNeX Oilfield Services Sdn Bhd is involved in drilling and oilfield services.

“To say that we are not serious about the O&G business is untrue. We are serious in growing the current O&G businesses that we have. We will focus on O&G trading and services, and drilling technology,” Samsul said.

He declined to comment on reports that DNeX may be looking to inject the O&G assets into Daya Materials Bhd.

DNeX shares closed unchanged at 27 sen yesterday, bringing a market capitalisation of RM474 million. Since news of the Ping sale broke in early June, DNeX’s share price has risen 8%.

 

      Print
      Text Size
      Share