FELDA companies on the hunt for oil and gas assets

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THE Federal Land Development Authority’s (FELDA) corporate units Felda Investment Corp Sdn Bhd (FIC) and Koperasi Permodalan Felda Malaysia Bhd (KPF) are scouting around for substantial stakes in publicly traded oil and gas companies, industry sources say.

It is understood that the current low price environment has prompted the government-linked company to actively look for oil and gas assets to snap up.

“They (FELDA) have been wanting to buy oil and gas companies for some time now and with the plunge in oil and gas asset prices, they have intensified their search. Many companies have depressed share prices at the moment,” a source says.

A few companies are understood to have been shortlisted but there are scant details.  

At present, FELDA’s shareholding in companies listed on Bursa Malaysia is fragmented. According to KPF’s annual report for the financial year ended Dec 31, 2012, it had deposits of RM2.23 billion and cash and bank balances of RM212.24 million. Its short-term liabilities were RM3.71 billion and long-term debt commitments RM356.89 million.

KPF has a close to 10.3% stake in Pantech Group Holdings Bhd, which makes pipes, valves and other fittings for the oil and gas industry. The settlers’ cooperative is also said to be a pre-initial public offering investor in special-purpose acquisition company Reach Energy Bhd.

Apart from these, it holds a 20% stake in sugar refiner MSM Malaysia Holdings Bhd, 6.64% in property developer Mah Sing Group Bhd, 5% in poultry company Teo Seng Capital Bhd and about 4.3% in timber and property company Leweko Resources Bhd.

KPF owns smaller stakes in such companies as Can-One Bhd, Concrete Engineering Products Bhd, ETI Tech Corp Bhd and SHL Consolidated Bhd, according to its 2012 annual report.   

According to its website, FIC — FELDA’s recently set-up investment arm — has a 26.7% stake in Iris Corp Bhd and 72.3% in construction outfit Encorp Bhd and equity interest in privately held businesses involved in travel and property development.

Bursa Malaysia-listed agribusiness company Felda Global Ventures Holdings Bhd is 20%-controlled by FELDA and 18.7% by Felda Asset Holdings Co Sdn Bhd.

FELDA also has 10.4% equity interest in printer BHS Industries Bhd.

Oil and gas sector battered

With crude oil prices spiralling down, stocks linked to the oil and gas sector have been badly battered.

Among those that have been adversely affected are large market capitalisation companies such as SapuraKencana Petroleum Bhd, Dialog Group Bhd and Bumi Armada Bhd and smaller players such as Alam Maritim Resources Bhd and Barakah Offshore Petroleum Bhd.

SapuraKencana, for instance, has fallen about 37%, or from a high of RM4.95, from end-December last year. It closed at RM3.10 last Thursday.

From a record-high of RM1.96 in early August this year, Dialog shed some 22% to close at RM1.49 last Thursday.

Business tycoon T Ananda Krishnan’s Bumi Armada slipped to a record low of RM1.36 on Nov 12, plunging more than 40% from March this year.

Interestingly, Barakah has gained about 26% since mid-October, buoyed by higher trading volume. However, prior to its recent rally, its shares fell by more than a third from end-July to mid-October.

Alam Maritim, meanwhile, has lost a little more than 50% since hitting a record high of RM1.68 in April this year. It closed at 81 sen last Thursday. Trading in Alam Maritim has also been relatively high lately.

Much of the negativity surrounding the oil and gas industry stems from depressed crude oil prices, which have tumbled about 30% since June this year and recently hit a four-year low of below US$80 per barrel. The slump is due mainly to the production of shale oil in the US.

The steep decline in oil prices has hit state-owned oil company Petroliam Nasional Bhd’s capital expenditure and company officials say the RM300 billion slated for five years from 2012 will be reviewed.

More competition   

Other than weak oil prices, a slew of small companies, such as shipping outfit PDZ Holdings Bhd, Ideal Jacobs (M) Corp Bhd and Ni Hsin Resources Bhd, have jumped on the oil and gas bandwagon, making the operating environment even more competitive.

It is worth noting that with FELDA — a statutory body — eyeing oil and gas assets, the market could get more difficult. “The environment will get more challenging with another GLC venturing into oil and gas. There is always pressure on Petronas to give jobs to GLCs for whatever reason,” an oil and gas official laments.

At present, many of the larger oil and gas companies have GLC shareholding. For instance, Malaysia Marine and Heavy Engineering Holdings Bhd — one of the country’s larger fabricators — is 66.5%-controlled by shipping company MISC Bhd, which in turn is 62.7%-owned by Petronas.

Other GLCs involved in oil and gas include fabricator and floating production storage and offloading owner TH Heavy Engineering Bhd, in which pilgrim fund Lembaga Tabung Haji has a 31.6% stake.

UMW Holdings Bhd, which has a 55.1% stake in rig owner UMW Oil & Gas Corp Bhd, is more than 50%-controlled by Permodalan Nasional Bhd while Ekuiti Nasional Bhd has 42% equity interest in offshore support vessel company Icon Offshore Bhd.

Then, there is fabricator Labuan Shipyard, which is partly owned by Umno, and Brooke Dockyard, which is controlled by the Sarawak government.

Boustead Heavy Industries Corp Bhd, which is indirectly controlled by Lembaga Tabung Angkatan Tentera, has a fabrication licence and oil and gas business as well.  

And this is just the list of GLCs with oil and gas links. It excludes the powerful, politically well-connected individuals who control oil and gas companies.

This article first appeared in The Edge Malaysia Weekly, on November 24 - 30, 2014.