Privatisation of Scomi?

Yesterday, there was an article stating that Scomi could be taken private.

Scomi was a stock that I had blogged a couple of times before. See regarding scomi , regarding scomi group again. (recommended reading :D ) and scomi again

• Scomi to be taken private?
  By Shahriman Johari
  ashahriman@nstp.com.my
  
  November 15 2006
  
  SPECULATION is rife that major shareholders of Scomi Group Bhd may take the integrated oil services firm private in a bid worth as much as RM1 billion.
  
  Sources said the main shareholders, who include the son of Prime Minister Datuk Seri Abdullah Ahmad Badawi, are considering this as an option as Scomi's market price does not reflect its true value.
  
  Taking it private could also in a way address unwarranted criticism that the group was favoured in bidding for government contracts because its major shareholder, Datuk Kamaludin Abdullah, is the son of the Prime Minister.
  
  Officials of Scomi, which makes drilling fluids that cool drilling heads and provides drilling waste management services, could not be reached for comment.
  
  Scomi's chief executive officer, Shah Hakim Zain, did not answer calls made to his handphone.
  
  Major shareholders could bid for the rest of Scomi at a price range of RM1.20 to RM1.50 a share, bankers said, citing swirling market speculation. The stock closed 6.2 per cent up at RM1.03 yesterday.

I am a strong believer that no corporate will embark on a corporate exercise if there is no monetary benefit to the corporation.

Is it profitable to take Scomi Group private? Have a look at this blog posting (scomi again )

Yes, Scomi made a remarkable record high earnings of 23.657 million for its last announced quarterly earnings.

But..

look at the bottom-line.

This company is in a NETT DEBT position of 903.946 million.

Let's look at what the article said next.

• "Scomi has a very strong cash flow. And based on what's been said about it, it makes sense for them to do it," said an executive close to the group.
  
  The major shareholders of Scomi are Kamaludin and Shah Hakim. Both hold 34.66 per cent of the company through Kaspadu Sdn Bhd as at May 11 2006.
  
  French insurance group AXA is the second biggest shareholder with 6.3 per cent, followed by the Employees Provident Fund with 5.73 per cent.
  
  This means that if the main shareholders were to make a bid for the rest of the shares, they might have to fork out some RM976.6 million based on an offer of RM1.50 a share.
  
  In September, Scomi said it expected to more than triple its sales to US$1 billion (RM3.64 billion) by 2009, helped by organic growth and new technology.
  
  "We are growing at a very fast pace, and certain markets this year will have between 50 per cent and 80 per cent growth," Shah Hakim said at the time.
  

Strong cash flow said an executive close to the group???

Could this EXECUTIVE define STRONG CASH FLOW????

Remember, back in Scomi's fiscal year 20003 Q2, Scomi Group was a simple stock earning 4.037 million for the quarter. But it's net debt was a mere 7.515. Very manageable. Look at it now. In a nett debt position of 903.946 million!

Is this the STRONG CASH FLOW?

How very strange!

I wonder which EXCUTIVE said that statement.

In today's Star, there's an artilce entitled "Scomi up on privatisation talk".

• “The possibility of Scomi being taken private is high as the group’s shares are grossly undervalued and, with all of its subsidiaries listed (after the listing of its oil field services division (OSD) on the Singapore Stock Exchange next year), it makes sense to take it private,” TA Securities said in a note.

Grossly undervalued? LOL!!!

• Meanwhile, sources said an announcement on a proposed privatisation of the group could be made soon.
  The TA Securities note said based on an indicative price of RM1.20 to RM1.50 per share, the privatisation deal could cost the group’s major shareholders, Datuk Kamaludin Abdullah and Scomi chief executive officer Shah Hakim Zain, RM787mil to RM984mil.

As, I was saying earlier, "I am a strong believer that no corporate will embark on a corporate exercise if there is no monetary benefit to the corporation."

So do you think it make sense to partake in a deal worth rm787 to rm984 million to fully own a company that has a nett debt of RM903.946 million???

Doesn't make much sense to me.

What say you?