Thursday February 21, 2013

UMW eyes O&G assets, money from Islamic bonds may be used to buy ‘bolt-on acquisitions’


PETALING JAYA: UMW Holdings Bhd is looking at oil and gas (O&G) acquisitions following the finalisation of its RM2bil sukuk musharakah facility.

Sources told Starbiz that the money to be raised from the sukuk issuance could be used to target potential “bolt-on acquisitions” that would complement its core O&G operations.

The sources added that the previously delayed initial public offering of UMW's O&G unit would definitely take place this year, as the division has been readied for it and is showing the right kind of earnings.

“UMW is in the midst of appointing its investment bankers to bring the unit onto the market,” revealed a source.

UMW's core O&G business consists of oilfield activities and services, while the non-core segment comprises the manufacture of oil country tubular goods (OCTG) and line pipes, the fabrication of O&G and other structures and trading services.

UMW's net profit more than doubled to RM299.1mil in the third quarter ended Sept 30 from RM146.9mil a year ago, driven mainly by the turnaround in its O&G unit from a loss to a pre-tax profit of RM45mil.

The group is expected to release its full-year results for the year ended Dec 31, 2012, next week on Feb 26.

For fiscal year 2012, the company is set to rake in full-year revenue contributions from NAGA-3, coupled with a 15% increase in the day-rate with effect from the second quarter.

UMW's O&G division is expected to continue contributing positively to the group, especially after its NAGA-1 oil rig commenced operations last year. NAGA-1 is a semi-submersible rig co-owned and operated by UMW in partnership with Japan Drilling Co Ltd and had undergone refurbishment to enhance its lifespan.

It had also recently taken delivery of its new jack-up drilling rig, the NAGA-4, which was constructed by Keppel FELS Limited at a cost of US$214mil (RM662.65mil).

This is the group's third jack-up drilling rig, in addition to NAGA-2 and NAGA-3. NAGA-2 is currently working in Indonesia for Hess (Indonesia-Pangkah) Ltd, while NAGA-3 is working for Petronas Carigali in Malaysia. Its O&G division was supposed to be listed a few years ago, but the plans were derailed as its pipe-manufacturing business was hit by intense competition.

The group was forced to make an impairment loss provision for WSP Holdings Ltd, which was among the factors for its O&G division suffering an RM191mil pre-tax loss in the financial year ended Dec 31, 2011.

China-based WSP is a 22.3% associate of the group, and has been affected by anti-dumping and counter-veiling duties imposed by the United States on OCTG produced in China.

Since then, private equity firm HDS Investments LLC has proposed to acquire WSP at US$0.60 (RM1.80) per share with the intention of taking it private.

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