Short Position

An employee walks past Sapura Energy logo at their headquarters in Kuala Lumpur on September 13, 2018. (Photo by MOHD RASFAN / AFP)

Sapura will get its RM4bil no matter what  

Sapura Energy Bhd had two things going on recently that are crucial to reduce its RM16bil worth of debt and put the company back on a stronger balance sheet.

First was the RM4bil rights issue it announced.

Priced at 30 sen, the rights shares were on a five-for-three basis, with one free warrant for every 10 rights shares subscribed, together with new Islamic redeemable convertible preference shares (RCPS) at 41 sen each to be allocated on a ratio of two RCPS to five shares.

Subsequently, the group is expected to benefit from savings in the finance cost of RM320mil as a result of this exercise.

Second, there was the share subscription agreement with Austria’s OMV Aktiengesellschaft (OMV AG) to sell a 50% stake in its exploration and production (E&P) unit – Sapura Upstream Sdn Bhd – for US$975mil (RM4.1bil).

The completion of the rights issue will reduce Sapura’s gearing ratio to about 0.9 times, while the 50% stake sale of its oil and gas E&P arm to OMV AG would shave the gearing ratio down to an estimated 0.7 times.

Up to Wednesday, these plans seemed to be on track.

Then, Sapura’s price dipped below the 30-sen level.

Reports have started appearing as to whether the rights issue will be able to go through.

Now, why would investors want to go through with this recapitalisation exercise when they can easily buy the shares below the 30-sen level from the market? Sure, there is a sweetener in the exercise, with a warrant thrown in. However, this is insignificant, and certainly not compelling, considering the risky global oil outlook.

Well, no matter what the price of Sapura is, the rights issue will go through, simply because Permodalan Nasional Bhd (PNB) has given its undertaking to take up the excess rights shares.

PNB is currently the second-largest shareholder in Sapura with a 12% stake. It has given its undertaking to take up its full entitlement rights shares with warrants, along with the excess shares and warrants not taken up.

As it is, all three major shareholders, which are PNB, Retirement Fund Inc (KWAP) and Sapura Technology Sdn Bhd, have agreed to take up their respective entitlements.

The single largest shareholder of the company is currently Sapura Technology, with a 15.9% stake. Sapura Technology is the family vehicle of Tan Sri Shahril Shamsuddin – the company’s president and group CEO. They will be forking out some RM300mil for their entitlement.

Should a scenario take place where all the other entitled shareholders with the exception of KWAP and Sapura Technology do not take up their entitlement, PNB will take up the excess rights shares.

This will result in PNB owning a 40% stake in Sapura, from its present 12%. In ringgit terms, PNB will be forking out close to RM1.8bil for the exercise.

PNB’s stake will further balloon to 49% if we were to take into account the full exercise of the warrants and conversion of the RCPS.

So, whether or not the oil price drops further or Sapura’s share price continues to weaken, the company will still get its much-needed RM4bil.


Details lacking on TransOcean-Swift deal

Transocean Holdings Bhd’s (THB) announcement this week for a reverse takeover of Swift Haulage Sdn Bhd has raised eyebrows in the market place.

The story of a smallish logistics player buying up one of its bigger competitors has raised questions whether it can be done.

THB is a logistics company listed on Bursa Malaysia with sizeable operations.

Swift, on the other hand, claims on its website that it is a “specialist in import and export of container haulage in West Malaysia, and a rising star in the industry. From No 88 when we began operations in 2011, we have now become the number one haulier in Port Klang in terms of TEU (twenty-foot equivalent unit) volume, with the largest market share”.

It adds that its operations are supported by its extensive facilities of 412 prime movers and 2,310 trailers with full visibility to customers via 24-hour access of live web tracking.

THB announced to Bursa Malaysia on Tuesday that it had proposed to buy a 77.2% stake in Swift for a whopping RM750mil. It has intentions to buy the entire stake in Swift too.

The deal is subject to due diligence and is to be satisfied entirely via the issuance of new ordinary shares in THB at an issue price of RM1.50 a share.

How it arrived at the RM750mil or RM1.50 a share price tag remains unclear at this juncture.

The other concern is that THB’s market capitalisation is only valued at RM37.7mil based on its latest share price, but it has proposed a deal which is multiple times higher than its worth.

Those in Swift selling their stakes in this deal include Kenanga Nominees (Tempatan) Sdn Bhd, Persada Bina Sdn Bhd, Laserforms Sdn Bhd, Angka Dayamas Sdn Bhd, Bluefin Bidco Limited, Glory Portfolio Sdn Bhd and Ng Chee Kin.

Although it is just a heads of agreement that has been inked thus far, the entire deal has attracted interest for its share price to rise 30 sen or 45.11% to hit limit up a day after the announcement was made.

Since then, the share price has hit a high of RM1.11 a share but has since eased to close yesterday at 92 sen a share, down eight sen.

The interest may be there but details are lacking, although both parties have given themselves 60 days to hammer out a definitive agreement. The 52-week low of THB is 35 sen a share, while its high is RM1.15 a share.


Property blues

WHEN the National Property Information Centre released its latest statistics on the property sector in Malaysia, it showed that the number of built and completed houses in Malaysia, together with the incoming supply, is going to reach six million units.

Urban migration, population and the make-up of households suggest that there is somewhat of an equilibrium between demand and supply of homes in cities of Malaysia.

The issue going forward is what is going to happen. As it is, the incoming supply is about half of what was being built two years ago, and if that continues, demand will surely exceed supply, given the demographics of population growth in the country.

How will future demand for homes be fulfilled by the industry? Property developers have been reluctant to reduce prices even though sales have been poor. The average Malaysian in general cannot afford the average price of homes in the country that has now crossed RM400,000.

Affordable homes are something that need to be pursued and that is where the government and GLCs have to come in to plug the gap. This situation will take some time to resolve but it must. Until the future generations can pay for homes without being burdened by high prices, the lingering tug-of-war on housing is not going to be settled.

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Business , Sapura , energy , rights


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