KUALA LUMPUR: Oil and gas (O&G) services provider Tanjung Offshore Bhd, which is in the midst of a heated shareholder tussle, is keen to put its troubles aside and continue on its search for a new core business.
“We are in a good position, whereby we have cash and there are a lot of cheap assets out there, giving us new opportunities for M&As (mergers and acquisitions) which we will go out and look for,” its newly-appointed chief executive officer (CEO) Rahman Shamsudin told The Edge Financial Daily in an interview yesterday.
“The oil and gas sector is still in our DNA and we are not deviating from that,” he said.
That said, the prevailing low crude oil price environment has made times challenging for those in the O&G vessel space, and charter rates have been compressed.
“Petronas (Petroliam Nasional Bhd) is renegotiating the price of current contracts of vessels, so charter rates are coming down. For new contracts, charter rates might not be good at this moment,” said Rahman.
“But I like the [vessel] business. Even though Petronas is cutting down operating and capital expenditure, services and maintenance have to go on,” he said, adding that this is one area with potential for the group.
Tanjung Offshore (fundamental: 1.85; valuation: 0.6) has been without a core business since 2012 when it sold off its offshore support vessel (OSV) business to Ekuiti Nasional Bhd.
The company has been busy restructuring and selling off non-profitable ventures since, and this, Rahman said, has reduced its overheads by 70% and also put it in a good cash position.
Cash and bank balances as at end-2014 stood at RM40.9 million, compared with RM32.8 million in December 2012. Net assets have reduced a marginal two sen or 3.78% per share to 51 sen per share against 53 sen in 2012.
The company’s earnings have been squeezed recently due to declining revenue. Net profit for the financial year ended Dec 31, 2014 (FY14) came in at RM1.06 million compared with RM10.9 million in FY13.
Revenue was down 67.2% to RM107.4 million in FY14 from RM327.8 million, due to the completion of various engineering equipment packages in FY13.
Rahman, who was appointed as CEO last month, is stepping in at a difficult time. Even before the disposal of its core business to Ekuinas, Tanjung Offshore was bleeding red. It incurred losses of RM55.4 million in FY11 (mainly due to operational losses and impairment of receivables of its engineering equipment division) and RM11.6 million in FY12 (mainly due to one-off losses from closure/winding up of subsidiaries).
In December last year, its hopes for a new OSV business were dashed when a planned reverse takeover of its business by Paris-based O&G vessel giant Bourbon SA fell through.
It has since been battling internal accusations of breach of fiduciary duty, among other things, which has resulted in two of its directors — Tan Sri Tan Kean Soon and Muhammad Sabri Ab Ghani — together with paid adviser Datuk Harzani Azmi being suspended of their executive and adviser roles, following the recommendations of an independent committee. The committee, formed on Jan 8, 2015 by Tanjung Offshore to conduct an internal review following speculative media reports on the company, is now conducting further investigations into the trio’s alleged wrongdoings.
Following his suspension, Tan, together with two others acting in concert, had filed to remove three directors — George William Warren Jr, Datuk Ab Wahab Ibrahim and Shahrizal Hisham Abdul Halim — from the board. The three are coincidentally members of the same independent committee that recommended the suspension of Tan, Muhammad Sabri and Harzani. The extraordinary general meeting to vote on the removal of the three directors is slated for March 27, 2015.
In response, Tanjung Offshore filed a RM100 million suit against Tan and six others on Feb 24 for alleged defamation. It has also been reported that the Malaysian Anti-Corruption Commission is now conducting investigations into six company officials over the acquisition of a UK property for RM58.07 million. It is also believed to be looking at the company’s acquisition of the remaining 49% stake, worth RM34.3 million, in Gas Generators (M) Sdn Bhd in October 2013.
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This article first appeared in The Edge Financial Daily, on March 17, 2015.