UMW will list its Oil & Gas subsidiary on Bursa Malaysia via an IPO by 4Q13. UMW will retain a 61% stake in UMW-OG post-IPO. The listing company will only include UMW’s profitable core O&G businesses in offshore drilling and oilfield services while the unprofitable, non-core loss-making O&G businesses will be retained in UMW. More details will be available in a briefing later today. NEUTRAL.

-  O&G IPO structure. UMW announced the details of the planned listing of its oil & gas subsidiary. The IPO price however will only be determined at a later date. This will involve: 1) The internal reorganisation of UMW Oil & Gas (UMW-OG); and 2) The IPO of 843.18m UMW-OG shares comprising 39% of the enlarged capital of UMW-OG. This will comprise an offer for sale by UMW of 231.38m UMW-OG shares and a public issue by UMW-OG of 611.8m new shares. UMW will retain a 61% stake in UMW-OG post listing. The institutional tranche will be 77% if the IPO shares with a price to be determined by way of bookbuilding at a later date. 55% of the retail tranche will be reserved for application by shareholders of UMW. The IPO process will be managed via an over-allotment option.

-  UMW–OG business. UMW-OG is a Malaysia-based multinational provider of drilling and oilfield services Under the drilling services 
business of UMW-OG, it provides offshore drilling and workover services with its fleet of offshore drilling rigs and hydraulic workover units (“HWUs”). Under the oilfield services business of UMW-OG, it offers threading, inspection and repair services for OCTG in Malaysia, Thailand, China and Turkmenistan, with a focus on premium connections used in high-end and complex wells.

- Other non-core O&G businesses remain in UMW. UMW will retain other non-core O&G business that will not form part of UMW-OG’s 
business and includes: 1) Onshore drilling services; 2) Manufacturing of OCTG and steel linepipes; 3) Providing anti-abrasion coating services for OCTG; 4) Repair and fabrication of steel structures for the marine, oil and gas, construction and other related industries; and 5) Trading, stocking, marketing and distribution of oilfield products.

-   Listing  in  4Q13. The listing of UMW-OG is only expected to be completed in 4Q13. No change to our forecasts, fair value estimate of MYR13.15 and NEUTRAL recommendation.

Source: RHB