Small listed firms catch tycoons eye “ REDtone ?

Saturday June 8, 2013

Small listed firms catch tycoons’ eye
By TEE LIN SAY
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Quek bought 10% or 92.79 million shares in TH Heavy Engineering Bhd via a private placement for RM41.8mil.

Stocks on Bursa Malaysia are on an upward trajectory.

Led by the heavy weight blue chips, they are on the bounce amid intermittent pauses.

Apart from an earnings season that some felt was better-than-expected, companies are not just the focus of institutional and retail investors that have bought stocks in droves.

Tycoons and corporate figures too started to take substantial shareholding or increase their stakes in small listed companies. Their have been buying shares prior the general election but of late, their presence is more noticable.

TH Heavy

In early May, Tan Sri Quek Leng Chan, via GuoLine Capital Ltd (GCL), bought 10% or 92.79 million shares in TH Heavy Engineering Bhd via a private placement for RM41.8mil. Part of that was directly through his youngest son Quek Kon Sean, who will subscribe to 27.8 million shares. GCL is a unit of Quek's flagship Hong Leong Co (M) Bhd.

TH Heavy CEO Nor Badli Mohd Alias said Quek's presence would create value for the company through his international networking and financial resources.

Now, Quek's interest in the oil and gas sector is nothing new. In fact, he has always been an active investor in the local stock market.

Previously, he has taken up stakes in the new listings of Kencana Petroleum Bhd and Petra Perdana Bhd.

He was also an investor in Multi-Purpose Holdings Bhd and fertility treatment company TMC Life Sciences Bhd.

Quek's first appeared as a shareholder in Kencana in 2006, and slowly built up his stake until he became a substantial shareholder in 2008.

At that time, Quek was the second largest shareholder with about 14% . At the peak of Quek's holding in Petra Perdana, he had a 13% stake in the company.

“Well I don't really think it's a very big deal when Quek buys a stake in a company. He has always been a savvy trader, and makes passive investment in companies he sees potential in. Once he makes his profit, he will exit the company,” says one observer.

The observer adds that TH Heavy probably caught Quek's eye because the company was in the transformation process. It had come out of the PN17 category and was looking to bid for big projects.

TH Heavy is an up-and-coming oil and gas company that has turned around and is poised to enter the big league. Its international oil company partner is bidding for one of the Risk Service Contracts by Petronas, and it recently formalised a joint venture with oil bigwig McDermott International Inc.

The joint venture with McDermott is a coup for TH Heavy as it now enables the company to bid for more complex jobs, and also immediately transforms it into a full-fledged engineering, procurement, construction, installation, commissioning (EPCIC) player.

In Malaysia, there are only two other players, which are MISC and its partner Technip, and SapuraKencana Petroleum Bhd, that can provide EPCIC works.

On Monday, shareholders approved TH Heavy's proposed joint venture with McDermott, where affiliates of both companies signed a joint-venture agreement to provide a broad spectrum of marine construction services, including full EPCIC solutions, to the offshore oil and gas industry.

Under the joint-venture agreement, THHE will purchase a 30% stake in McDermott's local unit, Berlian McDermott Sdn Bhd, while McDermott will acquire 30% in THHE's unit, THHE Fabricators Sdn Bhd. Both stakes are worth US$25.47mil (RM78.96mil).

Yinson

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With Mokhzani in the picture, an observer says the outlook for Yinson appears a lot brighter.

Last Friday, shares of marine support services provider Yinson Holdings Bhd rallied following the proposed entry of Datuk Mokhzani Mahathir-linked Kencana Capital Sdn Bhd as a substantial shareholder. Yinson had proposed to issue and place out new shares to Kencana Capital at RM2.82 each, to be paid for in cash. The new shares would not exceed 15% of Yinson's enlarged share capital of 220.4 million shares.

The exercise allowed it to finance potential acquisitions of business entities or assets that it was currently identifying, Yinson said.

In a text message to StarBiz earlier in the week, Mokhzani said: “Kencana Capital is an investment holding company that continuously looks at investments into listed and non-listed entities.

“We are subscribing for shares in Yinson to provide a capital base for them to explore further opportunities. Yinson is a clean, small company with interests in trading, logistics, ports and floating, storage and offloading vessels.

“This is independent of SapuraKencana. Kencana Capital is in real estate development and is a cornerstone investor in IHH Healthcare Bhd, Astro Malaysia Holdings Bhd as well as other medium to long-term investments,” said Mokhzani.

There are certainly rumblings that Kencana Capital's entrance into Yinson could spell bigger things for the FPSO provider. Yinson is a respectable oil and gas company with an orderbook in the range of RM2bil.

Yinson has created quite a niche for itself in the Vietnamese oil and gas scene. Currently most of its projects are involved in the production, storage and offloading (PSO), and floating production, storage and offloading (FPSO).

“With Mokhzani in the picture, I am sure the outlook for Yinson appears a lot brighter,” says an observer.

The company has previously stated that it wants to focus on Vietnam before looking at other countries in the region, for instance Malaysia and Indonesia. Yinson presently does not have a Petronas licence in Malaysia.

“Perhaps the time is now. Yinson has always stated that it wants to be a global company. FPSO jobs are abundant in Malaysia, Indonesia and Africa. I wouldn't be surprise if Yinson and Kencana Capital jointly invest or bid for a project in one of those countries soon.

“I am sure the options are open between the two companies. Perhaps this is Yinson's inflexion point,” says the observer.

Kenanga Research agrees.

In a note to clients, Kenanga Research said it was “pleasantly surprised” by the news of Kencana Capital's entry, coming as it did just days after a separate placement was fixed on May 22.

“Cumulatively, the two fund raising exercises will raise around RM165.5mil, just enough to fund Yinson's equity portion for another floating production project. Yinson's Lam Son FPSO has not been launched as yet.

“We believe this share issue could be a game changer for Yinson as the involvement of Kencana Capital could hint at a Malaysian project. Thus far, Yinson's business is mainly in Vietnam.

Yinson signed a pact last June with Petrovietnam Technical Services Corp (PTSC) worth US$737.3mil to provide an FPSO vessel with up to 10-year bareboat charter to Lam Son, a joint venture between Petroliam Nasional Bhd and PetroVietnam. Yinson has a 49% share in the deal and PTSC the rest.

REDtone

REDtone International Bhd has been of interest to tycoons and royalties recently.

Berjaya Corp Bhd founder Tan Sri Vincent Tan Chee Yioun raised his stake in REDtone to 13.86%, making him the second largest shareholder.

Tan has been a long time investor in the company,


Tan raises his stake in REDtone to 13.86%, making him the second largest shareholder.
Perhaps he has bigger plans for the company.

“Could it be part of a bigger picture to merge it with his privately owned 3G service provider U-Mobile and eventually list it?” asks one observer.

Tan is looking to float his private vehicles, namely 7-Eleven Malaysia Bhd, MOL Global Bhd, U-Mobile Sdn Bhd, Sports Toto Malaysia Trust (STM-Trust) and Bermaz Motor Sdn Bhd, and mostly in Singapore.

U-Mobile is the smallest of the telecommunications players to hold a 3G licence with about one million subscribers and it is performing below expectations.

There are currently four 3G players, DiGi.Com Bhd, Celcom Axiata Bhd, Maxis Bhd and U Mobile Sdn Bhd; and four WiMAX players - Asiaspace, Packet One Networks Sdn Bhd or P1 (a subsidiary of Green Packet), REDtone and YTL Communications Bhd.

Separately, Sultan of Johor Sultan Ibrahim Ismail, has emerged as the majority shareholder in REDtone's associate REDtone Network Sdn Bhd a company that has been shortlisted for the digital terrestrial TV broadcast (DTTB) bid, with a 51% stake.

In a filing with Bursa Malaysia, REDtone said Sultan Ibrahim purchased a further 21% interest in REDtone Network for RM315,000. The Sultan already has a 30% stake in the company.

REDtone announced last week that its 49%-owned associate REDtone Network was working with China's Huawei, Media Broadcast GmbH and PwC in its DTTB bid.

The DTTB bid is for the building, operating and managing of the sole digital terrestrial TV infrastructure in the country.

Kenanga Research said that REDtone's near term catalysts will be mainly led by its RM82.5mil universal service provider (USP) project as well as the synergies arising from its recent NSA agreement with Maxis.

“The group's future earnings are likely to depend on its ability to secure more USP projects and secondly, the degree of aggressiveness of Maxis' 4G LTE services rollout, which we have yet to impute into our forecasts,” said Kenanga.

Tan continues to be the second biggest shareholder in TMC Life Sciences with a 32.27% stake, while he is the single largest shareholder in Stemlife Bhd with a 12.12% stake.

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Tan raises his stake in REDtone to 13.86%, making him the second largest shareholder.