ICON OFFSHORE BHD has had an eventful year since its debut on Bursa Malaysia last June. Call it coincidence or bad timing, but global crude oil prices started falling from a peak of US$115 per barrel just weeks after the firm was listed.

The offshore support vessel (OSV) provider watched helplessly as its share price slid in tandem with the sharp fall in oil prices, which meant the oil majors had to scale down their operations and cut back on capital expenditure — bad news for the OSV industry.

The firm was hit with a double whammy when CEO Dr Jamal Yusof and chief operating officer Rahman Yusof — who is Jamal’s brother — were hauled up by the Malaysian Anti-Corruption Commission (MACC) on April 22.

This came as a shock and further dampened the stock, which has lost a total of 72.7%, from its initial public offering price of RM1.85 on June 25 last year to 51 sen currently. Icon’s market value has shrunk to RM623.91 million, from RM2.18 billion upon listing.

Nevertheless, at its present share price, Icon is trading at only 0.55 times book value, or 45% below its net asset value per share of 92 sen as at March 31. Taking out the intangibles, it is trading at 0.67 times its net tangible assets (NTA) per share of 76.5 sen.

Since OSV players are all about the vessels they own, would this be enough to pique the interest of some investors?

To give some context, OSV players Perdana Petroleum Bhd and Alam Maritim Resources Bhd are trading at a price-to-book ratio of 1.65 times and 0.91 times respectively. However, it should be noted that Perdana’s relatively high valuation is supported by a takeover offer from another O&G firm, Dayang Enterprise Holdings Bhd.

There are no “buy” recommendations on Icon among research houses that are actively updating their calls on the stock. According to Bloomberg data, the target price ranges from 42 to 87 sen among six research houses, three with “hold” and three with “sell” calls.

“Certainly, investor confidence has been shaken by the incidents at the company. It will take a long time before sentiment recovers. Adding to that, the current OSV segment is soft, with limited tenders out there and I believe the company will have a tough time utilising its fleet,” says an analyst with TA Securities, who has a “sell” call on Icon.

Icon’s balance sheet as at March 31 appears intact. Net gearing was 58%, with total debt of RM664.38 million and cash balance of RM37.99 million, against shareholders’ funds of RM1.08 billion. Its 33-vessel fleet is worth RM1.15 billion, or 0.98 sen per share, based on net book value as at Dec 31, 2014.

Icon boasts the youngest fleet among OSV players in Southeast Asia and has been active in rejuvenating its fleet, disposing of older vessels or those with lower specifications and replacing them with higher-specification ones.

However, more than 80% of Icon’s anchor handling tug and supply vessels are those within the 5,000 brake horsepower range — a segment that market observers say is oversupplied.

Analysts warn that the state of Icon’s balance sheet could change, with debts increasing significantly, if it takes delivery of five vessels currently under construction.

Icon chairman Raja Tan Sri Arshad Raja Tun Uda had however stated during a press conference last week that it only plans to take delivery of one vessel this year, with the remaining four deferred to 2017.

For the quarter ended March 31, 2015, the utilisation rate of Icon’s fleet — affected by the slowdown in the industry — stood at 64%. The norm, say analysts, ranges from 90% to 100%.

“We would like to maintain the 78% utilisation rate that we achieved in 2014, but it may prove to be difficult under the current economic conditions. However, we will be focusing on maintaining it through competitive bidding strategies for both local and regional jobs,” said Arshad.

Net profit for the first quarter ended March 31, 2015, declined 86.1% to RM2.71 million from RM19.5 million a year ago. Revenue slid 20.6% to RM63.59 million from RM80.07 million previously.

With deputy CEO Captain Hassan Ali now at the helm as Jamal takes a six-month leave of absence, many wonder if the company’s chances of winning contracts will be adversely affected.

Arshad said the business was in the capable hands of Hassan and reiterates that Icon will be competitive in the tendering process to maintain its utilisation rate despite the challenging year ahead for the industry.

However, analysts point out that Jamal was a key person and a hands-on CEO who helped secure deals.

A dentist turned O&G entrepreneur, Jamal founded Omni Petromaritime Sdn Bhd, which was later merged with Tanjung Offshore Bhd’s OSV unit Tanjung Kapal Services Sdn Bhd that then became Icon Offshore under a restructuring exercise facilitated by Ekuiti Nasional Bhd.

Ekuinas is the single largest shareholder of Icon, holding 42.28% through Hallmark Odyssey Sdn Bhd and 2.41% through Sempena Fokus Sdn Bhd, followed by Lembaga Tabung Haji, which has 8.43%.

This article first appeared in The Edge Malaysia Weekly, on June 1 - 8, 2015.

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