PETALING JAYA: Shares of loss-making TH Heavy Engineering Bhd (THHE) attracted trading interest early on Friday over talk that bigger rival Yinson Holdings Bhd
may offer a lifeline for some of the former’s assets, including the Layang oil and gas field off Sarawak that is reportedly at a standstill.
THHE shares rose to a high 14 sen in early trade, before easing 3 sen down to 12 sen at mid-day.
It was the top volume for the day with 117.14 million shares done.
Both companies are involved in the floating production, storage and offloading (FPSO) business.
However, industry sources said while Yinson is exploring all opportunities to replenish its orderbook and that it includes the Layang project, it is believed that Yinson is not keen to purchase any of its smaller rival’s assets.
“It is their (Yinson’s) day to day job to look for opportunities...they are in talks with JX Nippon Oil & Gas but there is nothing concrete on the Layang project at present as it is still too preliminary,” says an industry source close to the company.
The bidding process of FPSO contracts generally take six months to two years, he said.
“In the event that Yinson does bid for the Layang project, it is likely that the company will look for alternative solutions, instead of buying over THHE’s FPSO asset that is to be leased for the Layang field,” said the source, adding that the preliminary talks are currently between Yinson and JX Nippon.
THHE did not reply to StarBiz queries.
THHE had secured an engineering, procurement, construction, installation and commissioning (EPCIC) contract from Japanese outfit JX Nippon Oil & Gas Exploration (Malaysia) Ltd in 2014 for the bareboat lease of Deep Producer 1, for charter at the Layang oil and gas field in Block SK10, off the shores of Sarawak.
But since last year, the company had been served with several winding-up petitions, plus claims amounting to over RM45mil, mostly in relation to work for the Layang FPSO project.
Yinson’s five FPSOs are currently deployed across West Africa and Vietnam, while its FPSO Four Rainbow is up for redeployment opportunity.
The company has a US$500mil perpetual securities programme, which can fund up to US$2bil in capital expenditure, and a net gearing ratio of only 0.88 times at end-FY18 forecast earnings, CIMB Research noted in a recent report.
As for THHE, it needs to finalise a regularisation plan to address the company’s PN17 status and pay its creditors.
The 30%-owned Lembaga Tabung Haji (LTH) company slipped into PN17 category in April last year.
The company converted the Laurita, a partly-converted FPSO vessel that it bought in 2011 for US$82.5mil, into the Deep Producer 1 FPSO at an estimated cost of US$230mil (RM875mil), to be leased to JX Nippon Oil & Gas for deployment at the Layang O&G field.
A large part of the company’s current borrowings is to part-finance the acquisition and conversion of the asset.
Some reckon that a white knight may have to be roped in to complete the Layang project.
The company posted net losses of RM16.79mil in the second quarter ended June 30, 2017 and net losses of RM37.97mil in the first half.
Borrowings for that period totalled RM350.61mil, out of which RM55.51mil are long-term ones.
Last month, it was given eight more months to submit its regularisation plan.
In contrast, Yinson has been growing steadily.
It made a net profit of RM143.88mil in the first half of FY18, ending Jan.
Shares of Yinson closed one sen up to RM3.94 at mid-day.
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