Malaysia: Scomi Group outlines growth, recovery plans

Malaysia: Scomi Group outlines growth, recovery plans

Scomi Group Bhd has laid out plans for growth and recovery through its
expanded balance sheet following the proposed group-wide consolidation with
listed subsidiaries Scomi Engineering Bhd and Scomi Energy Services Bhd.

Scomi Group chief financial officer Mukhnizam Mahmud said the next step is
to raise capital to pare down debts and look for growth opportunities by
taking advantage of the bigger balance sheet.

He said divestment of certain non-core assets for about US$50 million (RM214
million) is only the first step and the group could be looking at the debt
market to restart its growth phase.

The group has not set any target on when it would return to the black but
Mukhnizam is adamant that the right steps are being taken to increase the
chances.

In the group-wide merger, Scomi's two listed units will be privatised and
delisted from Bursa Malaysia through a non-cash corporate exercise involving
share swap and issue of warrants.

It also proposed a share consolidation of every two existing Scomi Group
shares into one ordinary share and a bonus issue of seven warrants for every
10 consolidated Scomi Group shares.

Scomi Group, which currently has 65.6 per cent stake in Scomi Energy and
72.3 per cent stake in Scomi Engineering, will be operating as a single
entity by March next year, the beginning of its 2019 financial year.

Mukhnizam said to improve its top line and the bottom line, the group is
selling its vessels and other non-core assets for a minimum of US$50
million, diversifying its revenue streams to explore renewable energy
business as well as bidding for more rail projects locally and
internationally.

"We believe we still can get value for those vessels and other non-core
assets. We are in talks with certain parties which are our foreign partners.
We are taking conservative view on the assets valued at US$50 million. If we
were to succeed, the value will be beyond that.

"We expect our venture into renewable energy such solar, hydro and wind
power to contribute to our profit after two years. We are also working with
Chinese parties on rail projects," he said after Scomi Engineering's annual
general meeting here.

The vessels and other non-core assets have cost impairment losses. Slow
drilling activities have also reduced the utilisation rate of the vessels in
the past few years.

Scomi Energy has debts amounting to RM245 million while Scomi Engineering
has debts of RM526 million.

The order book for its oil and gas segment stood at US$700 million and rail
contracts at RM1.9 billion.

Mukhnizam said the group may change its core business over time, depending
on the business environment of rail and oil and gas industries.

He said the consolidation exercise is fair for all stakeholders as the
single entity will be able to have more flexibility in the use of resources,
improve its balance sheet and streamline the organisational structure for
easier decision-making process.

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

Link to Original Article:
https://www.nst.com.my/business/2017/08/271069/scomi-group-outlines-growth-r
ecovery-plans

--- --- --- --- --- --- --- --- --- --- --- --- --- --- ---

John Diecker
APT Consulting Group Co., Ltd.

www.aptthailand.com