Scomi to maintain O&G as core business

KUALA LUMPUR: Scomi Group Bhd, which is to merge with Scomi Energy Services Bhd (SESB) and Scomi Engineering Bhd (SEB), plans to keep oil and gas as its core business but develop the renewables and chemicals business which do not contribute much to the group right now.

“We’ve spoken about renewables, we are very positive about renewables and also we are positive about chemicals. In the last three years, we’ve developed certain products which, in terms of knowledge or expertise, we acquired through oil and gas (O&G) and leveraged it on other industries,” CFO Mukhnizam Mahmud told reporters at SEB’s AGM today.

“We are getting a bit of inroads in certain markets or industries and then hopefully that will take off because it is asset light and very scaleable. That’s what we like about the chemicals business,” he said.

In terms of renewables, the group’s focus will be on solar projects in Malaysia and hydro projects in Malaysia, Indonesia and Pakistan. It is also looking at some wind projects overseas, including Myanmar.

He said the renewables business currently does not contribute significantly to the group but is expected to be sizeable in the future as it is bullish on the sector. The group currently has one large scale solar project for 30MW in Kedah which is expected to contribute by end of 2018.

Mukhnizam said O&G will remain its core business after the privatisation exercise for about two years after which the composition might change depending on how it performs in renewables and chemicals.

In terms of the rail business, he said the exercise will give the group a bigger balance sheet, which will provide strength in looking at future rail projects. He said SEB’s balance sheet is currently a bit “stretched”.

Ongoing rail projects both in Malaysia and overseas (Brazil) will continue and will not be affected by the privatisation exercise. It will also continue exploring opportunities overseas for monorail projects. Its current outstanding orderbook is US$700 million (RM2.9 billion) for O&G and RM1.9 billion for rail.

On Monday, Scomi announced that it is merging the group with two listed subsidiaries, SESB and SEB via a share swap deal with free warrants. Scomi owns 65.65% of SESB and 72.33% of SEB.

“Essentially we are taking both SESB and SEB private by way of member’s scheme. We are trying to consolidate and just have one listed company and one single balance sheet to manage our challenges,” Mukhnizam said.

He said the shareholders of SESB and SEB will become shareholders of Scomi, giving them exposure to the other businesses under the group. He said there will be no management changes for now but expects to carry out some reorganisation once the exercise is completed in March 2018.

The privatisation exercise will also see Scomi divesting some non-core assets, especially in oilfield services, in order to pare down debts and develop the renewables and chemicals businesses. It is targeting to raise US$50 million or more from the divestment.

On the court case with Prasarana Malaysia Bhd, Scomi country president for Malaysia Zubaidi Harun said it has not affected the group’s ongoing rail projects nor its prospects for new rail projects.

“We don’t think it is a problem. Even during the dispute, we actually sought out a contract from MRT and have delivered 150 buses. The dispute does not preclude us from bidding for projects including government projects. Similarly overseas, we have not been affected… the dispute does not have that much impact,” he said.

Scomi’s share price rose 13.04% to close at 13 sen with a total of 16.39 million shares traded upon resumption of trading in the afternoon session. Its market capitalisation stood at RM247.40 million.