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Borneo Oil Bhd
Borneo Oil appears to have attracted much investor interest, following the company’s mid-year announcement of a new venture into alluvial gold mining in Pahang, and a capital reduction and private placement exercise that saw the entry of a new substantial shareholder.

Bouts of heavy trading in recent months have pushed its share price to an all-time high of RM0.94 as at Nov 11, 2014. Investor interest heightened further following the announcement last month that Tan Sri Lau Cho Kun of the Hap Seng group had emerged as a new substantial shareholder with a 23% stake.

Better known by its “Sugar Bun” franchise which is popular in Sabah and Sarawak, Borneo derives 83% of its revenue from its fast- food chain operations. It also has an oil, gas and energy related division that is mainly involved in EPCIC (engineering, procurement, construction and commission), but this division has been making losses.

Borneo has been alternating between profit and losses for the last five years. In FY Jan 2014, it managed to turn profitable with net profit of RM3.07 million, compared with a net loss of RM8.09 million the previous
year.

However, the better results were due to one-off gains, from an allowance for receivables written back of RM2.5 million and a procurement fee of RM6 million. In 1HFY2015, it posted net profit of RM845,000 on revenue of RM27.4 million.

Historically, Borneo has not paid dividends as it was on an expansionary path, with fixed assets having grown almost four times from RM15.5 million in FY2010 to RM56.3 million in FY2014. Gearing was minimal at only 1% in July 2014, before the private placement exercise.

Following the private placement and capital reduction, Borneo is estimated to have pro-forma net assets of 88 sen per share, with the stock now trading at 1.07 times book.

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This article first appeared in The Edge Financial Daily, on November 12, 2014.

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