Clock is ticking for TH Heavy Engineering

TH Heavy Engineering

IT’S been three days since the deadline has passed for TH Heavy Engineering Bhd (THHE) to have concluded a deal to acquire a private oil and gas (O&G) company called ICE Petroleum Engineering Sdn Bhd.

THHE has remained quiet. As of yesterday evening, THHE had not made any Bursa Malaysia filings. Neither has the company replied to a query on the matter from StarBizWeek.

So what gives and what is in store for the ailing THHE, which at last count was in a net debt position of some RM138mil, facing lawsuits in Dubai for one of its floating production, storage and offloading vessels and still stuck in a Practice Note 17 (PN17) status?

It is worth noting that on Dec 1, THHE announced that it has received another extension from Bursa Malaysia to submit its regularisation plan for it to be lifted from the PN17 status.

In a filing with Bursa Malaysia, the oil and gas (O&G) service provider said it “is still in the midst of completing the THHE due diligence exercise.”

“The company will make the necessary announcements on further development of the regularisation plan in accordance with the requirements under PN17, ” it added.

To be sure, THHE has until April 22 next year to submit its regularisation plan. Interestingly, THHE has been given a total of six extensions since 2017 to submit its regularisation plan to get out of the PN17.

The group has been in the PN17 status twice. The first time was in 2010 when it was known as Ramunia Holdings after it sold its Teluk Ramunia fabrication yard to Sime Darby Bhd for some RM530mil.

It got back on its feet in 2012. But then, in April 2017, the same fate befell THHE as it slipped back into PN17 after its auditors had expressed a disclaimer of opinion on the going concern assumption in the audited financial year ended Dec 31,2016 statement.

The deal between THHE and ICE Petroleum was first announced in mid-March this year, at the peak of the coronavirus (Covid-19) pandemic outbreak.

THHE had said the proposed acquisition of ICE Petroleum was part of its regularisation plan to revive its financial health in efforts to maintain its listing status on the Main Market of Bursa Malaysia.

THHE said its MoU with ICE Petroleum was in relation to the acquisition of 12.8 million shares, representing the entire equity interest in ICE Petroleum.

Among the conditions precedent for the completion of the acquisition are the results of a due diligence inquiry to be conducted on ICE Group by THHE’s representatives, and vice versa.

Sources say that deal was expected to be via a share swap that would have eventually seen ICE Petroleum, led by its founder Jalil Abdul Jalil Maraicar, emerge as the major shareholder in THHE.

Jalil first made headlines in 2013 after he turned around a loss-making company called PT Technic and sold it to APFT Bhd for more than RM30mil.

Following that, Jalil and his partners moved to buy another O&G outfit, which is now named ICE Petroleum. It was reported that ICE Petroleum posted a profit after tax of RM2.75mil for its financial year ended Sept 2019 on the back of RM217.33mil revenue.

ICE Petroleum is primarily involved in mechanical engineering and plant fabrication as well as installations for the oil, gas and petrochemical industries.

A source points out that ICE Petroleum is currently working to form a partnership with an international O&G upstream player.

The proposed deal between THHE and ICE Petroleum came a year after Finance Ministry (MoF)-owned Urusharta Jamaah Sdn Bhd (UJ) took over close to 30% stake in THHE from Lembaga Tabung Haji.

The acquisition was part of the rescue plan for Tabung Haji which involved UJ buying Tabung Haji’s distressed assets.

However, UJ saw the departure of its first CEO Izad Sallehuddin in July this year. He was appointed to the post in April 2019. Izad was also the chairman of THHE, a position that he relinquished after he had ceased to be the nominee director of UJ.

The status of the deal between THHE and ICE Petroleum is unknown for now. If the deal is off the table, then THHE will need to come out with a new regularisation plan within four months.

Sources say that THHE may be looking to buy the remaining 51% stake in its joint-venture company with Destini Bhd to build offshore patrol vessels.

The JV company, called THHE Destini Sdn Bhd, was formed in 2016, which is 51% owned by Destini and 49% by THHE.

In 2017, the JV won a RM738.9mil contract from the government to supply three offshore patrol vessels (OPVs).

But the question is, is THHE in a position to raise sufficient funds to carry out that contract?

As at end-September this year, THHE had cash and cash equivalents of RM9.6mil, compared to RM26.55mil a year earlier.

Shares in THHE closed 10% lower to 9 sen per share yesterday.

It is noteworthy that in September, UJ raised its stake in THHE to 64% from 30% earlier, after its irredeemable convertible preference shares came to maturity. UJ has received a waiver from launching a mandatory takeover for the remaining shares in THHE.

After almost three years in PN17 status and six extensions, one wonders if THHE will face the same fate as Perisai Petroleum Teknologi Bhd. Perisai fell into PN17 in 2016 and was delisted from Bursa Malaysia early this year.

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