IJM Corp, Malaysia's second-biggest builder by market value, slid the most in almost a year after agreeing to buy a stake in energy services company Scomi Group Bhd.

The stock fell 7.1 per cent to RM4.75 in Kuala Lumpur as of 2:46 p.m., poised for its steepest decline since Oct. 4. It was the biggest drop in the 818-member MSCI Emerging Markets Index, which fell 0.1 per cent. Scomi surged to a 19-month high.

Selangor-based IJM will acquire as much as 25.1 per cent of Scomi by subscribing to new shares and convertible bonds for a total RM149.3 million in cash, according to a statement to the stock exchange today.

Scomi, which provides logistics support and field services for the oil and gas industry, has RM841 million of bonds and term loans that fall due by 2014, according to data compiled by Bloomberg.

"People don't understand why IJM management is picking up these shares," Choo Swee Kee, who helps manage the equivalent of US$228 million as chief investment officer at TA Investment Management Bhd, said by phone in Kuala Lumpur. "There is no link to their existing business. Investors are concerned whether there is a purpose in buying it. It's not clear to them."

The purchase price equates to 33 sen per Scomi share, IJM said in its statement. Scomi, which also manufactures monorails, surged 8.6 per cent to 38 sen, poised to close at the highest level since Feb. 9, 2011.

"Investors may perceive IJM's move largely as a bail-out measure, given that Scomi has an existing bond due for repayment later this month at a magnitude of RM100 million," Kong Heng Siong, an analyst at OSK Investment Bank Bhd, wrote in a report today.

‘Strategic Investment'

IJM has dropped 16 per cent this year, compared with a 5.7 per cent increase in the benchmark FTSE Bursa Malaysia KLCI Index. Teh Kean Ming, its managing director, couldn't be immediately reached for comment when phoned at his office today.

"The proposed strategic investment in Scomi will enable the company to gain an accelerated foothold in the fast-expanding oil, gas and energy sector," IJM said in its filing. This will "enhance shareholder value by providing the company with new business streams at a reasonable entry cost."

The acquisition comes as Malaysia accelerates oil and gas exploration to reverse an output slump. Petroliam Nasional Bhd, the Southeast Asian nation's state energy company, has been tapping partners including Hess Corp and Petrofac Ltd to develop new fields, giving a positive knock-on effect for local service providers.

IJM's fair value was cut to RM4.73 from RM5.05 at RHB Capital Bhd, analyst Joshua Ng wrote in a report today.

"We are not convinced by the rationale of the acquisition," Ng said. "Even if IJM for some tactical reason must venture into the oil and gas sector, we believe there are better acquisition targets." -- Bloomberg