HDBSVR maintains Tanjung Offshore fully valued, TP 70 sen

KUALA LUMPUR: Hwang DBS Vickers Research said Tanjung Offshore's proposed demerger of its marine business to Ekuinas for RM220mil would solve the critical funding issue for non-marine business.


Tanjung’s marine services division provides various types of drilling rigs,logistics and technical support to oil field operators.
The research house said under the plan, there will be a proposed distribution of RM130mil or 44 sen a share and shareholders will be given option to subscribe to Ekuinas' marine business.

This will be via the redeemable convertible preference shares (RCPS) based on existing shareholdings. The marine business is slated for an IPO within two years.

“We believe that shareholders will be better off by not subscribing to the RCPS to be issued by Ekuinas for the marine business despite the IPO plan,” it said.

HDBSVR said the marine business' net gearing of 2.2 times post-demerger provides little comfort to cashflow given only 2.0 times interest coverage ratio, based on its estimate.

It maintained Tanjung fully valued with a target price of 70 sen.