新闻: Not all pleased by Maybulk plan for unit

From: http://www.btimes.com.my/Monday/OurPick/jmbc16-2.xml/Article
Published: 2008/09/17
Author: By Jeeva Arulampalam

INVESTMENT analysts gave mixed reviews to a related-party proposal by shipping company Malaysian Bulk Carriers Bhd (Maybulk) to buy into an offshore marine support services unit."

It's not attractive qualitatively. For Maybulk shareholders, what they had bought into was a shipping company and not an oil and gas firm," OSK Research Sdn Bhd acting head of research Chris Eng told Business Times.

An analyst, who declined to be named, added that the investment could eat into Maybulk's future dividend payout as its excess cash is reduced.

On Monday, Maybulk's major shareholder, Singaporean Pacific Carriers Ltd (PCL), invited the former to invest in PCL's wholly-owned unit, PACC Offshore Services Holdings Pte Ltd.

Maybulk would buy new PACC Offshore Services shares valued at US$150 million to US$250 million (RM518 million to RM863 million).

PACC Offshore Services, which provides support services to the offshore oil and gas industry, has more than 70 vessels, with another 52 to be delivered over the next three years.

Eng said that with oil prices falling, it may not be the right time for Maybulk to diversify as offshore vessel charter rates are under pressure.

Some analysts also expressed concern over the related-party deal because of risks such as overvaluation of assets.

Maybulk told Business Times that it would decide on the deal by the middle of next month, after it has considered all aspects of the proposed investment."

Barring unforeseen circumstances, (the deal is) expected to be completed before end-2008," a director said in an e-mail response yesterday.

The director also said that the proposed investment would translate into an equity stake of 13 per cent to 21.7 per cent.

Maybulk views the oil and gas sector as a growth area. Its investment in a second-hand container vessel, which will be converted into an offshore accommodation vessel, marks the group's entry into offshore support services.

Kenanga Investment Bank analyst Liong Chee How said the proposed investment seemed favourable at face value as the offshore oil and gas sector was stable.

CIMB Research analyst Raymond Yap said the sector would do well as long as oil prices remained above US$60 to US$70 (RM207 to RM242) a barrel.

However, both Liong and Yap added that the caveat to the deal was the price.

Kenanga also said in its report that Maybulk's cash coffer of RM1.2 billion as at June 30 2008 was sufficient to finance the proposed investment."

We estimate the group's cash level at RM700 million by year-end, post-investment in PACC Offshore Services, is adequate to support our financial year 2008 dividend forecast of 48 sen," Kenanga said.

It added that the new investment could help mitigate earnings volatility in the bulk shipping business.

Maybulk's share price declined 1.3 per cent to RM3.02 yesterday.