Journey to Wealth
About Scomi Marine ...
Scomi Marine
For the last three years (2009-2010), the Scomi group had embarked on a series of internal restructuring exercises which include the disposal of under-performing foreign units.
In the United States, Scomi hived off its entire oilfield business where the run rate for jobs had shrunk as much as 80% to around 40%. Similarly, the group is planning to exit the markets in Nigeria and Algeria, and has reduced its UKinvestments to 20%. Central to its restructuring plans are the internal reorganisation within the group that will see Scomi Marineemerge as an integrated oil and gas marine and drilling services provider. This involves a reverse take-over (RTO) exercise that will marry Scomi's eastern hemisphere oilfield services with Scomi Marine's offshore support services. As part of the exercise, the minority shareholders of SOL and two other units currently (Oct 2012) parked directly under the Scomi Groupie SKMC and Scomi Sosma would also migrate into the enlarged Scomi Marine entity.
Post-restructuring, the effective stake that Scomi will hold in Scomi Marine would rise from 43% to 66%. Scomi Marine made a capital repayment of RM136mil (RM0.18.5 sen per share) on 29 Sept 29 through the reduction of its par value (from RM1 per share to 45 per share) that gave rise to RM525mil. The balance RM330mil is to be set off the entire accumulated losses of Scomi Marine. This would result in Scomi Marine emerging with a cleaner balance sheet and a debt/EBITDA ratio of about two times (including working capital).
Taken together, do not discount the possibility of seeing Scomi Marine being chosen as the vehicle to bid for future contract bids rather than its parent, Scomi. By extension, this would also reduce the risk of IJM having to inject more equity into the Scomi group beyond its RM149mil investments.
Scomi's management revealed two key engines of growth which it believes would propel Scomi Marine to the next level. One is expanding core product base. Scomi shared that the group has an estimated share of 7% in the Eastern hemisphere drilling fluids and waste management market worth US$5bil.
Apart from Malaysia (40%) market share, Scomi is looking to ride the regional exploration & production boom by offering integrated upstream drilling services via an enlarged Scomi Marine.
Scomi Group's CEO said that after the company's Oct 2012 restructuring, Scomi will focus on its key oil and gas growth areas both locally and in the eastern hemisphere.
Scomi also confirmed that it had put in bids for risk-service contracts (RSC) for two of Petronas' upcoming marginal oilfield under Petronas and was bidding for rm15 billion worth of rail jobs which it plans to partner with IJM on civil works.
For IJM Corp, it has merits from an investment perspective as Scomi is turing around. But prospects for order book enhancement via Scomi's ventures are still preliminary. Market observers remain unexcited (Oct 2012) about potential job prospects for IJM via Scomi.
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
