Ni Hsin plans O&G venture

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STEEL cookware maker Ni Hsin Resources Bhd says it is diversifying into the oil and gas (O&G) sector and talking to potential joint-venture partners.  The rise in its share price last month had caught the market by surprise.

Ideal Jacobs (M) Corp Bhd may emerge as one of its O&G partners, while more changes are expected on Ni Hsin’s board after two new faces emerged on Oct 10.

According to Ni Hsin’s newly appointed executive director Datin Ida Suzaini Abdullah, “credible” people with O&G know-how will be appointed to the board soon.

“Ni Hsin is planning to diversify into the O&G sector. We are setting up a unit to venture into E&P (exploration and production). We are also talking to several local and foreign parties to do joint ventures with us. If everything goes according to plan, we should see a deal soon and some solid projects within 12 months,” she tells The Edge.

“In the coming weeks, there will be more announcements of new people joining the board. These people will have O&G background.”

Two people were appointed to the board on Oct 10 after the Tsiao family from Taiwan sold down its stake of about 58% in Ni Hsin to 35% recently. The undisclosed new shareholders are believed to have O&G links.

On Oct 10, Ni Hsin announced the appointment of Ida as executive director following the resignation of an executive director who is a member of the Tsiao family. Ida had previously worked as an adviser to O&G consultancy firm Persada Nuri Sdn Bhd from 2006  to 2008, geologist in Sarawak Shell Bhd (1984 to 1994) and dealer representative in Rashid Hussain Securities (1995 to 2005).

Meanwhile, Rizvi Abdul Halim was appointed independent director of Ni Hsin on Oct 10. He is also a director in Ideal Jacobs, which is now undergoing a reverse takeover (RTO) exercise with two O&G outfits. Rizvi was a senior manager at Securities Commission Malaysia from 2000 to 2012.

Despite the diversification plan, the Taiwanese shareholders will stay in control of Ni Hsin at the moment. Ida says Hsiao Chih Jen and Hsiao Chih Chien are expected to remain chairman and managing director respectively.

In the interview, Ida says her appointment was made with the consent of the new investors and the Tsiao family.

A company source tells The Edge that Ideal Jacobs is currently talking to Ni Hsin about a collaboration. “If a deal is struck, then some directors from Ideal Jacobs will join the board of Ni Hsin,” he says.

Ideal Jacobs plans to focus on downstream activities in the sector after the completion of the RTO exercise.

Ida does not refute the talks.

She is also unfazed by the recent fall in the crude oil price and the consequent plunge of O&G stocks. She believes it is a good time for Ni Hsin to venture upstream in the sector.

“When prices are low and raw materials are cheap, it presents a good opportunity to enter the O&G sector. Lower prices will be to our benefit. It takes some time to develop from the exploration to the production stage. But very soon, we will conclude a deal.”

Ni Hsin will raise funds via a rights issue or other corporate exercises to fund its O&G investment. The company, which has paid-up capital of RM47.32 million, lacks the funds needed to enter this capital-intensive sector, Ida notes.

For the first half of this year, Ni Hsin incurred a net loss of RM251,000 on reduced revenue of RM19.89 million. Last year, it posted a net profit of RM2.28 million on revenue of RM55.15 million.

In response to market scepticism about the company’s venture into O&G, Ida says: “Although I was not in the O&G sector in recent years, I still have a lot of contacts in the sector. I have stockbroking background too … My heart and soul are still with the O&G sector.”

She assures investors that Ni Hsin’s O&G venture “is a solid plan”.

Until recently, trading in the firm’s shares had been slow. But in early September, the stock began to rise from 15 sen, hitting an all-time high of 51 sen on Sept 23. The counter ended at 42 sen last Tuesday. As at end-June, Ni Hsin’s net assets per share stood at 26 sen, according to a filing with Bursa Malaysia.

Ni Hsin’s share price and volume had shot up ahead of the disposal of 23.66 million shares by Hsiao Tsai Sheng, a member of the Tsiao family, via a direct deal on Sept 18.

The company was slapped with an unusual market activity query on Sept 18, following the sudden surge in its share price and volume, amid market talk that it was venturing into the O&G sector.

Following the disposal by Hsiao Tsai Sheng, the Taiwanese shareholders sold more shares.  On Sept 30, Hsiao Liu Lee sold 21 million shares. On Oct 10, the chairman and his son announced they had sold 3.396 million shares while the managing director sold 2.796 million shares, according to Bursa filings. The takers were not announced.

Ida says Ni Hsin’s financials for the second half of the year should improve as Japan, its major customer for cookware, has been making many enquiries.

She says, along with the diversification plan, Ni Hsin will be expanding its core business of steel products into new markets.  The company  aims to achieve an annual growth of 10% to 15% in this segment.

The new markets identified are Indonesia and the untapped local Malay market, as well as China and some European countries. For China, some parties with strong contacts in the mainland are helping to market Ni Hsin’s Buffalo brand of cookware.

In its 2013 annual report, the company claims it is a leading manufacturer of premium stainless steel multi-ply cookware in Asia and the largest exporter of premium cookware in Malaysia.

Last year, Japan accounted for 30% of Ni Hsin’s total revenue while Malaysia contributed 22%. Its other markets included Europe (17%), Taiwan (11%), North America (3%), China and Hong Kong (3%), Singapore (2%) and Korea (2%).

This article first appeared in The Edge Malaysia Weekly, on October 27 - November 2, 2014.