SCOMI GROUP BHD
KLSE (MYR): SCOMI (7158)
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Ride The Bull Short The Bear
CS Tan
4.9 / 5.0
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....
jay_cwk88
484 posts
Posted by jay_cwk88 > 2019-04-13 15:51 | Report Abuse
How its fortunes have changed from a decade ago.
It was once an oil and gas darling in the early 2000s under then CEO Shah Hakim Zain and his partner Tan Sri Kamaluddin Abdullah. Barely a year after its debut on Bursa Malaysia in May 2003, the stock was trading close to the RM20 level because of its potential from new contracts as well as mergers and acquisitions.
Today, it is saddled with long-term borrowings of RM119.84mil and short-term borrowings of RM566.09mil. The company is also cashflow negative, with a deficit of RM25.98mil as of Dec 31, 2018.
For the nine months period to Dec 31, 2019, total losses stood at RM75.55mil on the back of RM421.97mil. Losses in the previous year stood at RM90.58mil on the back of RM571.7mil in revenue.
To make matters worse, on Feb 13, Scomi told Bursa Malaysia that it had defaulted and received a notice of demand from Malayan Banking Bhd for RM201.91mil.
The default arose due to the failure by Scomi Rail Bhd (SRB) to pay Maybank under the bank facilities granted to the company.
SRB is a wholly-owned subsidiary of Scomi Engineering Bhd, which in turn is a wholly-owned subsidiary of Scomi Group.
Scomi Group also received a notice of demand from Maybank amounting to RM113.96mil, due to Scomi Rail’s default.
As of Scomi’s announcement on April 8, Maybank has granted the group a further extension of time until April 22.
But all is not lost.
On April 4, Scomi Group announced that it had settled a dispute it had with Prasarana Malaysia Bhd relating to the Kuala Lumpur Monorail Fleet Expansion Project contract that dates back to June 3, 2011.
This settlement comes with a RM303mil contract, out of which RM181mil of works will be almost immediate.
The settlement also entails Scomi Group’s wholly-owned subsidiary Scomi Transit Projects Sdn Bhd (STP) entering into a deal for Prasarana to acquire seven new sets of four-car trains for the Rapid KL Monorail route. STP would also repair five sets of four-car trains that have stopped operating since January last year.
The orders of the seven new trains are worth some RM122mil and will take 30 months to materialise.
In the nearer term, the work order for the refurbishment of the five sets of trains worth RM181mil will take place. The announcement of this deal saw Scomi’s share price hit limit up, jumping to a high of 14.5 sen from its previous close of 5.5 sen.
The stock has since settled at the 10 sen level, with many investors still sceptical about the company’s ability to turnaround sustainably.
Scomi Group’s new group chief executive officer Sammy Tse Kwok Fai who replaced Shah Hakim last July, is confident that things are looking up for the company.
Stronger financial footing
Tse explains that the settlement agreement signed with Prasarana has several conditions precedent (CP) to be fulfilled within 14 working days from the date of the agreement.
He says that successful execution of the agreement with Prasarana is one of the key factors to improving Scomi’s financial position.“The immediate focus is to fulfil the CP and to commence the refurbishment works and subsequently to formalise the agreement for the manufacture of the seven new four-car trains,” says Tse.
More importantly, Tse adds that the agreement with Prasarana will contribute towards meeting short-term obligations and cash flow for the transport solutions business.
“However this is not the only factor. Of a greater impact to our balance sheet would be the planned corporate exercises. This will give us the flexibility to improve our cashflow and strengthen business development activities”.
Tse says Scomi is