AsiaBio diversifies into O&G transportation

KUALA LUMPUR: Asia Bioenergy Technologies Bhd's (AsiaBio) proposed venture into the oil and gas transportation industry, will see new shareholders, including Tan Sri Halim Saad-linked Sumatec Resources Bhd, hold a collective stake of more than 20% in the technology company.
AsiaBio yesterday signed a heads of agreement (HOA) with Hoe Leong Corp Ltd (HCL), Sumatec and Reachmont Logistics Sdn Bhd (RLSB) to facilitate the acquisition of Semua Shipping Sdn Bhd (SSSB) and Semado Maritime Sdn Bhd (SMSB) for RM168 million by the group.
According to the HOA, the shares in SSSB and SMSB will be transferred to a special purpose vehicle, which will be held collectively by HCL, Ebony Ritz Sdn Bhd (which represents minority shareholders in the two companies) and RLSB.
AsiaBio will pay for the two companies by issuing new AsiaBio shares to the SPV.
The SPV have committed to a net profit guarantee of RM8 million and RM14 million for 2014 and 2015 for SSSB and SMSB. SSSB and SMSB are involved in the business of shipping and provision of shipping-related services and own five and three oil tankers and vessels respectively.
Currently CPE Growth Capital Ltd and Pelaburan MARA Bhd are the largest shareholders of AsiaBio, with a 11.13% and 10% stake respectively.
SSSB and SMSB are wholly-owned subsidiaries of Semua International Sdn Bhd, an associated company of Sumatec Resources and an investee company of Hoe Leong Corp.
The definitive agreement for the transaction is subject to regulatory approvals and has an exclusivity period of three months.
Speaking at a press conference here yesterday, AsiaBio executive director Steve Tan Sik Eek said the acquisition would allow the group to expand into downstream oil and gas activities such as the transportation of petroleum products in Malaysia, Singapore and within the region.
While global oil prices have been falling over the recent months, he said this is not a concern for the group, as costs of moving products have become even cheaper.
Tan added the acquisition would give an immediate return to the group, unlike its current business of technology incubation that needs more time to bear fruit.
According to director of Reachmont Logistics Bhd Bong Siet Fah, SSSB and SMSB hold total contracts worth over RM200 million.
For the nine-month period ended October 31, 2014, AsiaBio incurred a widened net loss of RM1.28 million compared with RM914,000 in the previous corresponding period.
In spite of the corporate exercise, Tan is non-committal of turning around the group in FY15.
"We're clearing legacy investments, we should be working towards that, but I don't want to make a forward-looking statement," he said.
Trading in AsiaBio shares was suspended in the morning session pending the material announcement. It was up 2 sen or 10.53% to close at 21 sen yesterday, with some 72.16 million shares changing hands, being the fourth most heavily traded stock.