Scomi Group may sell some assets

Scomi Group told StarBiz the asset disposal is one of the avenues to reduce the debt position.

PETALING JAYA: Scomi Group Bhd plans to dispose of some assets within the next 12 months as the group aims to pare down its debt after its merger with Scomi Engineering Bhd.

Scomi Group told StarBiz the asset disposal is one of the avenues to reduce the debt position.

“Apart from asset disposals, we are also considering using cash from our operations to reduce our debt.

“As to timeline, we hope to materialise the asset disposals within the next six to 12 months,” a spokesperson from the company said.

As at Sept 30 last year, Scomi Group stood in a net debt position of RM673.7mil, while Scomi Engineering has a net debt of RM473.6mil.

The spokesperson said Scomi Group’s proposed merger exercise with Scomi Engineering will proceed.

However, Scomi Energy Services Bhd will not join the merger after the recent rejection by its shareholders.

The corporate restructuring exercise will see Scomi Engineering’s total debt to be consolidated and undertaken by Scomi Group.

To recap, the proposed merger, first announced in August 2017, involved three listed entities on Bursa Malaysia – Scomi Group, Scomi Energy and Scomi Engineering.

The merger was expected to streamline Scomi Group’s operations and finances as the group refocuses its strategy on rail and renewable energy.

Scomi Group is the single largest shareholder in Scomi Energy and Scomi Engineering, with stakes of 65.64% and 72.3%, respectively.

However, Scomi Energy’s shareholders shot down the merger idea in a recent EGM, following fresh optimism in the oil and gas sector.

“We are optimistic that there will be plenty of synergy between Scomi Group and Scomi Engineering given the foray by Scomi Group into renewable energy sector where there are plenty of engineering scope within the project.

“We will now end up with two listed companies instead of one as earlier proposed. We will still realise some of the cost savings due to the merger between Scomi Group and Scomi Engineering.

“The synergy between renewable and engineering for project implementation and manufacturing facilities will help reduce cost and increase efficiency,” said the company.

The low crude oil price environment in recent years had been rather negative to Scomi Group.

The company has seen its revenue about halve over the past 10 years and in the first half of financial year 2018 (1H18), it posted a wider net loss of RM42.17mil.

Similarly, Scomi Engineering is also in the red, with an increased net loss of RM31.28mil in 1H18.

The merger between both companies are expected to create a streamlined and leaner structure, which may improve the companies’ financial and operational performances.

According to the Scomi Group, the group is anticipated to see better revenue and earnings as the activities in the oil and gas sector increase moving forward.

“We are also focusing our efforts into the renewable energy sector to augment the revenue stream of the Group. We are exploring potential opportunities and is optimistic that our performance will improve once we secure and commence work on these projects.

“The renewable projects secured will start contributing revenues next financial year which will be positive.

“Furthermore, the increase in the coal business and overall improvement in the oil & gas sector will also contribute to the improvement in performance because Scomi Group still own a majority stake in Scomi Energy,” it said.

With regard to its transport segment, the group plans to focus on the Malaysian market for new projects going forward.

“As for our marine division, we are looking at vessel disposals to reduce idling costs, improve operational efficiencies to improve margin and secure extensions to key contracts,” said the company.