The takeover of Ramunia Holdings Bhd by national carrier MISC Bhd took the market by surprise. One industry observer aptly put it when he said that such a level of secrecy had not been seen since the early days of the Cosa Nostra.
Judging by the swift leap in Ramunia's share price (it has gained some 33% since the announcement), the market seems to have taken a positive view of the deal, for the fabricator at least.
MISC has remained relatively unchanged since the announcement and closed at RM9.65 on Friday. Despite the lack of enthusiasm, the deal seems to be a sweet one for MISC as well.
To recap, MISC via its wholly owned unit MSE Holdings Sdn Bhd is taking up the reins at Ramunia Holdings Bhd, via the injection of Malaysia Marine and Heavy Engineering Sdn Bhd (MMHE) at a deal valued at RM3.2 billion. MMHE is a wholly owned unit of MSE Holdings.
Ramunia is issuing as many as RM1.4 billion worth of shares at RM1 each, and RM1.8 billion worth of 3.7%, 7—year irredeemable convertible preference shares of 50 sen each at par value.
A second part of the deal involves MSE Holdings making a renounceable offer for sale of 82 million of its shares in Ramunia at RM1 each, to minorities of the latter.
Effectively, the deal values MMHE at RM3.2 billion and Ramunia's stock at RM1 per share. At a price tag of RM3.2 billion, most analysts say MISC was offered a good price for MMHE.
On the RM3.2 billion price tag, OSK Investment Bank's analyst Chris Eng says, "The pricing of MMHE at RM3.2 billion is at a historical price—earnings ratio (PER) of 19.5 times and prospective PER of 14.6 times, which is cheap as oil and gas companies go."
It is also worth noting that some 18 months ago, MISC acquired 35% of MMHE off Kuok Brothers Sdn Bhd and IMC Enterprises Inc, the vehicles of billionaire tycoons Robert Kuok and Tan Sri Frank Tsao Wen King, for some RM181.6 million. After this acquisition, MISC wholly owned MMHE.
Industry sources say MISC made a massive gain as its setting up of MMHE, including the acquiring of equity held by Kuok and Tsao, amounted to slightly more than RM400 million, which means the RM3.2 billion price tag translates to a valuation gain of some RM2.8 billion.
An industry observer quips that if anyone should feel slighted, it should not be the shareholders of Ramunia or MISC, but rather Kuok and Tsao who now seem to have sold the company for a song.
The sale of 82 million shares at RM1 each will also net MISC an additional RM82 million. But the sale also gives Ramunia's minorities a chance to buy Ramunia shares at a significant discount to its current market price. Ramunia closed at RM1.61 on Friday.
Certain quarters argue that the valuation of Ramunia at RM1 a share is too low, considering that it is the only fabricator with unutilised yard space.
RHB Investment Bank Bhd's managing director Chay Wai Leong in an emailed response to The Edge, however, says, "The issue price of RM1 per share was arrived at after considering the 5—day volume weighted average market price of Ramunia's shares of RM1.16 up to Jan 17 this year, that being the last market day prior to the suspension of trading, and the audited consolidated net asset per Ramunia share of RM1.01 as at Oct 31, 2006." RHB Investment Bank is the merchant banker advising Ramunia.
Chay adds that the potential earnings of the fabrication yard had been taken into account, and the size, utilisation and potential increase in the growth potential of the yard as well.
"The acquisition will allow Ramunia to expand its fabrication facilities from 170 to 260 acres and increase its operational capacity to undertake more complex, larger scale, multiple and value—added projects such as deepwater fabrication contracts. The combined order book will be beneficial to the existing shareholders of Ramunia in terms of potential future earnings and prospects," he says.
There could be quite a number of benefits for Ramunia's shareholders. HLG Research's Jason Saw says with MISC at the helm of Ramunia, investor perception of management risks at Ramunia is eliminated. He adds that it is also likely that investors will be willing to place a premium on the company due to the merged entity's strong parentage, that is, oil major Petronas.
Saw also says the merged entity will be able to absorb an additional RM3 billion to RM4 billion worth of work on top of the existing order book of RM3.8 billion.
Management perception of Ramunia hit a snag in the middle of last year, when the company and Petronas were at loggerheads.
Ramunia was thrust into the limelight in—mid 2007, over a dispute with Carigali—PTTPEPI Operating Company Sdn Bhd, which is a 50%—owned unit of Petronas.
The oil fabricator had been awarded a contract for JDA Block B—17 in the Thai—Malaysia Joint Development Area, but had issues with pricing. The dispute was, however, settled out of court.
This issue is now in the past, with Ramunia likely to be an indirect unit of Petronas, after MISC emerges as a 72% stakeholder, after the reverse takeover. However, the company will reduce its shareholding to 68%, after hiving off 82 million shares.
Ramunia's jewel in the crown is its yard in Johor, which spans some 170 acres. Combining the two yards, the merged entity will have some 260 acres of prime yard space, fronting deepwater which will enable large—scale fabrication works to be carried out.
It is also worth noting that the lion's share of Ramunia's contracts come from Petronas, which is MISC's parent, controlling 62.4% of the shipping company's equity.
The enlarged entity would stand to benefit as Petronas is likely to award some RM10 billion worth of fabrication jobs this year, and Ramunia, being the only fabricator with available yard space, seems set to gain handsomely.
Aseambankers, in a research reports, says, "We are positive on this deal, as the merger of Ramunia and MMHE is a symbiotic fit, allowing both parties to leverage on their respective strengths. Firstly, this exercise will result in Ramunia emerging as the largest offshore fabricator in Malaysia with a yard size of 260 acres. This deal also allows MISC to unlock value in MMHE, which enhances value in both sides. We believe MMHE's capabilities can optimise Ramunia's operations, and expect a gradual but progressive transformation in efficiencies."
(taken from www.theedgedaily.com by Jose Barrock)
No comments:
Post a Comment