Thursday 28 Mar 2024
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This article first appeared in The Edge Malaysia Weekly on July 22, 2019 - July 28, 2019

STRUGGLING urban rail transport technology company Scomi Group Bhd is getting a lifeline, with new shareholders Tan Sri Wan Azmi Wan Hamzah and Gelombang Global Sdn Bhd agreeing to subscribe for its rights issues with warrants and extend loans to it.

However, besides giving Scomi the much-needed funds to settle some of its borrowings and capital for future businesses, how will Wan Azmi and Gelombang Global’s Datuk Mohd Zakhir Siddiqy improve the prospects of the company?

“With Wan Azmi and Zakhir as substantial shareholders of the company, coupled with its largest shareholder IJM Corp Bhd and founder Shah Hakim [Zain], Scomi will have a strong set of shareholders who are experts in engineering, construction, infrastructure and property development,” says a banker familiar with Scomi.

“This could be a rebirth for Scomi to become a much more capable company that would be able to participate in infrastructure construction jobs and property development to supplement its core monorail technology business.”

Wan Azmi is a well-known figure in infrastructure development and management, property development and the investment sector.

He owned a 30% stake in Syarikat Pengeluar Air Sungai Selangor Sdn Bhd (SPLASH) through The Sweet Water Alliance Sdn Bhd before the water concessionaire was taken over by Pengurusan Air Selangor Sdn Bhd for RM2.55 billion in a deal signed in August last year.

Wan Azmi and his wife, Puan Sri Nik Anida Nik Manshor, are the largest shareholders of Rohas Tecnic Bhd with a total holding of almost 43%. Rohas Tecnic is a leading supplier and fabricator of steel towers for the power distribution sector.

In March, Wan Azmi re-emerged as a substantial shareholder of Eastern & Oriental Bhd (E&O) through Sweetwater SPV Sdn Bhd with a 9.09% stake. He held an 11.95% stake in the Penang-based property developer, before selling the shares in 2011.

Zakhir is a former managing director of Renong Bhd, one of the most illustrious construction and infrastructure groups in Malaysian history. He is also the independent, non-executive chairman of HSS Engineers Bhd.

HSS Engineers is involved in the engineering design, construction supervision and project management businesses. It is the design consultant for construction works for the East Coast Rail Link (ECRL) and an independent consultant engineer for the Mass Rapid Transit Line 2 (MRT2).

Nevertheless, Wan Azmi is coy about his involvement in Scomi. Responding to The Edge’s queries about the purpose of his investment in Scomi, he says all of his investments are intended to be passive.

To recap, Scomi announced last Thursday that Wan Azmi and Zakhir’s private vehicle Gelombang Global had committed to invest RM42 million collectively in the group by underwriting the proposed rights issue that was announced in May.

Wan Azmi and Gelombang Global will subscribe for their portions of the rights issue and underwrite the unsubscribed portions, if any. If all of the rights shares were subscribed, Scomi would issue restricted rights shares to both shareholders.

The value of the investment by both shareholders will not be more than RM21 million each, including the restricted rights shares. The rights shares are priced at 18 sen each while the restricted rights shares are priced at 19 sen apiece.

Through the rights and restricted share issuance programme, Scomi will be able to raise a maximum of RM254.8 million in gross proceeds.

At the same time, Wan Azmi and Gelombang Global have each extended a RM21 million loan to Scomi. The amount will be partly or wholly used to offset the payment for the restricted issues, if applicable.

The net proceeds from the programme will be used to repay part of the advances from its subsidiary Scomi Energy Services Bhd, fulfil a cash settlement to Malayan Banking Bhd and repay part of the outstanding non-trade creditors’ credits, as well as be utilised for working capital requirements.

Scomi has also revised its proposed share capital reduction exercise. From the initial plan to reduce its share capital from RM224.96 million to RM40 million, the company is now looking to reduce it to RM3 million.

This will give rise to total credits of RM221.96 million, higher than the RM184.96 million that would have been raised from the previous proposal. These credits will be used to offset the future losses of the company or in such a manner to be determined by its board of directors.

“This is a major push by IJM and the new substantial shareholders. The exercise will strengthen Scomi’s balance sheet and prepare the group to emerge as a major rail engineering company in the region,” comments the banker source.

Upon the completion of the rights and restricted issues, the proposed liabilities settlement and assuming that Warrant B is fully exercised, Wan Azmi’s stake in Scomi will increase from 0.75% currently to 5.98% under the maximum scenario while that of Gelombang Global will increase from 0.01% to 5.85%.

Under the minimum scenario, Wan Azmi’s stake will climb to 12.41% while that of Gelombang Global will increase to 12.17%.

The source whom The Edge spoke to says that there are about RM60 billion worth of infrastructure development projects in the pipeline that Scomi will be able to participate in.

“The group could be looking at operation and maintenance contracts for rail and buses, as well as construction works for infrastructure projects. The government has announced that there will be 40% contracts carved out for the ECRL.

“The Penang Transport Master Plan (PTMP) also seems to be moving [ahead], which means more construction jobs for local players with the right capabilities. Scomi could take advantage of the opportunities and participate in the tenders,” says the source.

Last Wednesday, Transport Minister Anthony Loke said the ministry had greenlighted Penang’s Bayan Lepas light rail transit (LRT) project.

While the approval is subject to conditions, including a three-month public exhibition and inspection, it signals that the government is agreeable to the PTMP going ahead.

Besides the Bayan Lepas LRT, the PTMP also includes proposals for three monorail lines — between KOMTAR and Paya Terubong, KOMTAR and Tanjung Tokong, and Raja Uda and Permatang Tinggi in Seberang Prai.

The announcement jolted Scomi’s share price from its slumber, with the counter jumping over 30% last Friday to reach an intraday high of 12 sen before closing at 10 sen per share, giving the company a market capitalisation of RM96.022 million.

 

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