EA Technique falls 25% on debut listing

KUALA LUMPUR: Shares of oil and gas service provider EA Technique (M) Bhd fell 16.5 sen or 25.38% yesterday in its debut on Bursa Malaysia amid weakness in oil and gas counters as a result of falling global oil prices.

This compares with the broad-based FBM KLCI's 1.19% decline yesterday.

EA Technique's share price saw a discount of 6 sen or 9.23% after the opening bell against its offer price of 65 sen. It closed the lowest at 48.5 sen on some 53.96 million shares done, being the day's most active counter.

Last Tuesday EA Technique announced that net profit for the third quarter ended Sept 30 almost halved, to RM4.78 million compared with RM8.17 million in the previous corresponding period on higher cost of services and administrative expenses.

Its managing director Datuk Ir Abdul Hak Amin however, believes the group's earnings will improve going forward given the delivery of new vessels.

He explained that the lackluster performance in the third quarter was mainly due to higher operating costs as as a result of the charter of several vessels from external parties.

"We've to charter in for higher price, the negative part we've to absorb," he said, adding that six new vessels are expected to be delivered by next year.

On the conversion of an oil tanker into a floating storage and offloading unit (FSO), Abdul Hak expects it will contribute an additional US$40 million (RM139 million) in revenue stream upon completion by April 2015. "We already have a firm contract (for the FSO), it's about US$40 million," he added.

E.A. Technique has an order book of RM1.2 billion, which could keep it busy until 2025. It is also bidding for RM1 billion worth of domestic jobs, with an expectation to secure one or two projects in the near future.

Abdul Hak stressed that the group will not be affected despite declining oil prices as all of its contracts are long term and have been locked-in.

"We're quite insulated, whether oil prices are up or down, it doesn't affect us," he added.

EA Technique currently operates 31 marine vessels, of which 22 vessels are owned by the company.

Of the RM74.1 million proceeds raised through the initial public offering (IPO), RM30 million will be used for the repayment of bank borrowings, RM29.2 million for capital expenditures and RM9.9 million for working capital.