RM80m pricetag for Samudra Oil fair,reasonable : KAF

by **Cals** Tue 18 Feb 2014, 07:23

Posted on 18 February 2014 - 05:38am

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PETALING JAYA (Feb 18, 2014): KAF Investment Bank Bhd has opined that the RM80 million price tag for the disposal of Samudra Oil Service Sdn Bhd is “fair and reasonable” and not detrimental to shareholders of Kejuruteraan Samudra Timur Bhd (KSTB).

“Accordingly, we (KAF) recommend that you as a shareholder of KSTB to vote in favour the special resolution pertaining to the proposed disposal of Samudra Oil to be table at the forthcoming EGM of KSTB,” KAF said in the circular to the exchange on behalf of KSTB yesterday.

KSTB proposes to sell the entire stake of Samudra Oil to Destini Bhd for RM80 million to be satisfied entirely by 228.57 million shares of 10 sen each in Destini at an issue price of 35 sen a share.

The investment bank said the proposed disposal of Samudra Oil Services Sdn Bhd is timely and represents an opportunity to KSTB)for immediate value realisation for Samudra Oil or tubular handling services division.

It also eliminates the group’s exposure to the risk directly associated with the tubular handling services (THS) business.

It said the unlocking of the tubular handling services division at a premium would also enable the recognition of an estimated one-off net gain of about RM66.03 million to KSTB Group which in turn will enable it to eliminate its entire accumulated losses from its balance sheet.

In addition, KAF said the company could utilise the proceeds generated from the proposed disposal of Samudra Oil to acquire new prospective businesses or assets to further contribute positively to the growth of the KSTB Group.

It said the revenue and profitability of the tubular handling services division for the past five financial period or years under review has been fluctuating. This can be largely attributed to the volatile and cyclical nature of the oil and gas industry and uncertainty in the global economic condition during 2008/2009 global financial crisis.

Whilst KSTB has secured several contracts under the 2013-2018 Pan Malaysia THS contracts, there is no certainty in the level of demand of business for the tubular handling service and ultimately the financial performance of Samudra Oil as there is no indication on the value of the said contracts as the value of such services depends on the demand and activity levels of the customers and the scope of services rendered during the durations of the contracts.

It said the future financial performance of Samudra Oil would depend on, amongst others, the outlook of the Malaysian and global economy as well as the oil and gas industry and its ability to overcome the various challenges or risks prevalent in the business operations and the industry.

As such, it said there is no absolute assurance that Samudra Oil will continue to sustain its revenue growth and profitability going forward.

Upon completion of the proposed disposal, KSTB may be classified as a “cash company” or PN17 company under the listing requirements. In the absence of any regularisation proposal within the stipulated timelies subsequent to the completion of the proposed disposal of Samudra Oil, KSTB shares may be suspended and subsequently delisted from the official list of Bursa Securities.

However KSTB has made known of its intention to maintain its listing status and endeavors to identify new businesses or assets for acquisition.

In the event that the board is unable to identify any suitable prospective businesses or asset within 12 months from the date of completion of the proposed disposal, the remaining proceeds from the disposal will be distributed back to the shareholders.