KUALA LUMPUR (Apr 28): Gas Malaysia Bhd has teamed up with Sime Darby Offshore Engineering Sdn Bhd (SDOE), a wholly-owned subsidiary of Sime Darby Bhd, to undertake biogas compressed natural gas (BioCNG) distribution business extracted from the palm oil mill effluent.

In a filing with Bursa Malaysia, Gas Malaysia (fundamental: 2.1; valuation: 1.1) said it today signed a joint venture (JV) agreement with SDOE for the purpose.

Under the deal, the two companies will form a JV company, in which SDOE will hold a 51% stake and Gas Malaysia the remaining 49%.

"The board of directors of the JV company shall comprise of at least five directors, of which three persons shall be nominated by SDOE and two persons nominated by Gas Malaysia," said Gas Malaysia.

It added that the JV will serve as a platform for the group to supply natural gas to new customers currently not served by its existing pipeline.

“The parties seek to optimise the combined strengths of each partner in their respective fields.

“Gas Malaysia with vast experience in marketing and promotion of natural gas usage to industrial, commercial and residential sectors in Peninsular Malaysia through pipeline distribution has the potential network and infrastructure to facilitate the proposed business activities of the joint venture,” said Gas Malaysia.

Gas Malaysia will fund its investment in the JV company through its internal funds.

SDOE is primarily involved in systems integration and marketing of products and services in the oil and gas/petrochemical industry.

At the noon break, Gas Malaysia shares were four sen higher at RM2.65, with a market capitalisation of RM3.35 billion.

(Note: 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.)