Huge Payday For Scomi Engineering Investors And...... Scomi Group

Yeah I SAW Scomi Engineering's Special Dividend announcement. Yummy! A special dividend payment of 29.5 sen. (well to be more precise it is 23.5 sen tax exempt and 6 sen less tax of 25% or 28 sen nett)

Then something just clicked.

Aha Scomi Group.

Why? I recalled the posting on Scomi Group posted last month: Scomi Creditors Allows Scomi To Postpone Repayment Of 630 Million.

Well posted on that posting, as per Scomi Group's last reported earnings, at end March, Scomi Group had 135.191 million in cash and total debts of 1.303 billion and Scomi Group had some 630 million medium-term notes that needed to be redeemed but somehow its creditors were kind enough to allow Scomi Group postpone the payments.

630 million medium-term notes to be redeemed.

Big bucks.

And yeah, it's nice to know there are still kind creditors around. :D

Now Scomi Group, as per Scomi Engineering's 2009 Annual Report, Scomi Group owns 69.31% of Scomi Group or some 192,567,567 shares of Scomi Engineering. A 28 sen dividend from Scomi Enginerring should work out to close to 54 million! (Do correct me if I am wrong or flawed in my calculations. :D )

Now I had written on Scomi Engineering before, in Nov 2009, I posted A Quick Look At Scomi Engineering's Quarterly Earnings.

Anyway, fast forward to present day. Scomi Engineering's last reported earnings was on May 2010: Quarterly rpt on consolidated results for the financial period ended 31/3/2010. A quick check would show that cash balances is around some 49 million and total debts is about 225.468 million.

Now Scomi Engineering had announced earlier about its disposal of assets plans, ie the disposal of Machine Shop Business for USD101 million. See announcement here: Announcement_SEB.pdf

Sounds familiar?

No?

And then .... what about all them Scomi Marine postings on its recent disposals of assets?

Hmmm.... doesn't it 'suddenly' not fall nicely into the small picture?

Just posted the other day: Do You Think Scomi Marine Is Doing A Fire Sale?

Oh... gosh... that 'the other day'... was just two days ago! Oh my! How time flies so quickly.... when there is no FIFA. :D

Anyway after the disposals of assets , as per my flawed calculations, Scomi Marine should be net cash of around 486 million. The experts thinks it should be around 522 million. Ok, say I am wrong and let's use that 522 million. Ya.. the more the better. :D

Now as per the 'according to source' theme mentioned in that news article highlighted in the posting, Do You Think Scomi Marine Is Doing A Fire Sale?, Scomi Marine is speculated (they use the word 'may' :P ) to make a capital repayment.

Huhu... capital repayment.

I wonder how small Scomi Group shareholding in Scomi Marine.

Well, according to Scomi Marine's 2009 annual report, Scomi Group owns some 42.71% of Scomi Marine or 313,043,478 shares.

Hmm... 42.71% of 522 million.... is how much?

Hmm... that should be around 222 million.

But ... but.. but... I don't see Scomi Marine making a full capital repayment of 522 million... I just don't see.... lol... unless I am blind of course. LOL!

Anyway... IF Scomi Marine do make a capital repayment... ya... Scomi Group would get the bulk of the money.... how much? I dunno. It depends on the IF and HOW BIG is the capital repayment.

And this is where it all clicked in...... let me see if I can get it correct... but if I am wrong... lol... I am wrong. Don't bash me up for it. :D

Let's see.... the chain of events here....

Scomi Engineering announces disposal of asset... then .... Scomi Engineering announces NICE special dividend.

Scomi Marine announces disposal of asset... err... Scomi Marine... speculated to make capital repayment.



And oh yeah.. Scomi Group is the largest shareholder....



Oh.. Scomi creditors just recently allowed Scomi Group to postpone its loan payment due...



Hmmmm........ mmmmm...... mmmmmmmmmmmmm












PS: THIS IS NOT A STOCK TIP!

LOL!

How many times need I say that I am NOT a SOTONG? :P

Do You Think Scomi Marine Is Doing A Fire Sale?

On Star Business: Scomi Marine may make capital repayment

• Wednesday July 14, 2010
  Scomi Marine may make capital repayment
  By JAGDEV SINGH SIDHU
  
  Firm also looking at expanding Indonesian coal shipping business
  
  KUALA LUMPUR: Scomi Marine Bhd may undertake a capital repayment exercise following the huge gains made from the disposal of its Indonesian coal shipping assets, which boosted its net cash to RM552mil.
  The company, however, is also looking at other options which include investing in larger vessels to expand its coal shipping business in Indonesia beyond South-East Asia or an entirely new business direction, said a source.
  
  “Upon the completion of the disposal, the board will have an action plan,” said the source...

So said the source. :D

Love the title too... 'may'.

Hmmm... if this source is credible, then I wonder what is the following statement is all about?

• huge gains made from the disposal of its Indonesian coal shipping assets, which boosted its net cash to RM552mil.

Huge gains? Again here is Scomi Marine's own announcement on Bursa Website. Announcement (FINAL).pdf

• The Proposed Disposals are expected to result in SMB realising a loss on disposal of about RM433 million (which is subject to change, the final amount of which will be determined on the Completion Date). (Page 5) ( or see Scomi Marine Disposal Of Assets For A LOSS of RM 433 Million! )

Scomi Marine's own words was SMB will realise a loss on disposal of about rm433 million.

Boosted net cash to rm522 mil?

Hmm... the article on today Star also said the following...

• Scomi Marine has a debt of RM70.8mil after disposing its marine logistics business. After paying that off, the company would have a sizeable hoard to pursue new opportunities, which might include the purchase of panamax for shipping coal to countries such as China or India where demand for that commodity is on the rise.

Ok.. the marine logistics was sold for 348.7 million. As per Scomi Marine's quarterly earnings on May 2010: Quarterly rpt on consolidated results for the financial period ended 31/3/2010. Scomi Marine has cash equivalents of 74.4 million and debts and debts of over 486.490 million.

Now the 348.7 million is not IN yet. But if I add it up, it should be a net debt of 63.3 million. As per Scomi Marine own statement, yesterday sale proposal was RM549.330 million. Which means, Scomi Marine could be in a potential net cash of 486.03 million. Which is slighlty off from the rm 522 million stated. ( Ah... but ... but... what's the big deal.. since it's only off slightly. :P )

Anyway... in the posting And what about Scomi Marine The Share? , I received one set of good questions... which I have no answers. :D

• solomon said...
  Moolah, is this a fire sales as if it sound like RM983million asset now selling for RM550 million?
  
  Or the other way round, another old trick by Investment Bankers to transfer asset?
  
  Do u see any reason to sell if the company profit is showing upward trends?

Yes, is this a fire sale?

And Scomi Marine is in a hurry to dispose these assets. Why?

And why at a lost?

And yes if theses companies were making good money, why sell at a lost?

And.... if this is not a fire sale... then why?

Tell me why.

Back on Feb 2010, the disposal of its marine logistics business for rm348.7 million. The following is the announcement posted on Bursa website. SMB Announcement - Disposal of CHO.pdf

Page 6 is most interesting or baffling for me. (Perhaps I cannot under stand too much :P )

• CHO owns and operates vessels to support and service the offshore oil and gas industry mainly in Indonesia, Australia, Latin American and Middle East. Its offshore support services are involved in various phases of offshore exploration, development and production activities. These services include towing and anchor handling of drilling rigs, transportation of supplies and personnel, and supporting other offshore activities.
  
  The issued capital of CHO as at 29 January 2010 is SGD95,251,166.
  
  For the financial year ended 30 June 2009, CHO registered an audited consolidated profit after tax of USD56.2 million and its audited net assets as at 30 June 2009 is USD187.4 million.

Now the disposal of CHO will result in a net gain of RM63.6 million to SMB Group. (page 7)

But CHO disposal price consideration stated is SGD143.5million or RM348.7 million.

CHO made USD56.2 million for its fiscal year 2009. Based on an exchange rate of 3.2, this works out to rm 179.8 million in earnings.

If CHO can make USD56.2 million or rm179.8 million in a year, how and why is Scomi Marine selling this ASSet for only rm348.7 million? Hehe... don't jump the gun. :P

Scomi Marine doesn't owned CHO completely. It owns only 29.07% of CHO and this 29.07% stake was sold for rm348.7 million.

Is the sale too cheap based on earnings?

Let's see if my calculations are flawed.

29% share of the 179.8million profit would equal to some 53.58 million.

So let me think about it... say I have rm348.7 million in hand and I want to make rm53.58 million... I have to seek an investment giving me a return of investment of 15.3%!

Is it easy to find such a return of investment? (ps: in 2007, CHO earned USD 40 million. Two years later, in 2009, CHO earned 56 million. Nice growth eh? )

If not, why sell so cheaply?

I guess I am wrong because the minority shareholders HAD already approved the disposal of CHO in April 2010.

Yeah, some would ask was that NOT a fire sale.

Here's the link to Scomi Marine's disposal of ASSet announcement again: Announcement (FINAL).pdf

I am sorry but I don't see the earnings track record of those 5 companies being sold.

Now considering the fact that those 5 companies (CH Logistics Ltd, CH Ship Management Pte Ltd, Goldship Pte Ltd, Sea Master Pte Ltd and PT Batuah Abadi Lines) are being disposed for a loss of rm 433 million, don't you think Scomi Marine should at least provide the investing public the financial track record of these 5 companies?

How?

Is it wrong to think that this is a fire sale?

And what about Scomi Marine The Share?

LOL!

Blogged this morning: Scomi Marine Disposal Of Assets For A LOSS of RM 433 Million!

Now the disposal of the ASSets were worth some 550 million. ( Who cares about the losses? :P3 )

Last I saw, the stock traded at 47 sen. Up a nice 4 sen. Why? Very simple.

550 million from these assets disposals is more than the market capital of Scomi Marine itself!

See below.... at 47 sen, how much is Scomi Marine's market capital?

True... but what the accounting of the losses?

How?

I dunno. LOL!

Hey stop starring. :P

It's the blardee stock markets and sometimes, on certain days, on certain times, they seem to have a mind of their own. :D

ps: seriously... i have no idea if this stock can make you lose money.

ps/ps: my name is not Sotong.

Scomi Marine Disposal Of Assets For A LOSS of RM 433 Million!

Scomi Marine has announced a disposal of some key assets.

Business Times version: Scomi Marine sells 5 overseas assets for RM550m
Star Business version: Scomi Marine brings in strategic investor for Indon ops
Bernama version: Scomi Secures Strategic Investor For Indonesian Coal Logistic Business
Edge Financial Daily: Scomi Marine active, down in early trade

And here is Scomi Marine's announcement posted on Bursa website: Announcement (FINAL).pdf

Page 5:

• EFFECTS OF THE PROPOSALS
  
  SMB expects to receive USD171,800,000 (equivalent to RM549,330,500 based on the exchange rate of USD1:RM3.1975 as quoted by BNM on 12 July 2010) in cash proceeds upon completion of the Proposals, while retaining an equity interest in PTRT of up to 24.55%.
  
  The Proposed Disposals are expected to result in SMB realising a loss on disposal of about RM433 million (which is subject to change, the final amount of which will be determined on the Completion Date).

Yup. This disposal would result in Scomi Marine realising a loss on disposal of about rm 433 million!!!!!!

And you would think that for the size of the loss, our local media would at least want to mention a word or two on it.

Here's Business Times version:

• Scomi Marine sells 5 overseas assets for RM550m
  
  By Zuraimi Abdullah Published: 2010/07/13
  
  It is learnt that Scomi Marine plans to pare down its debt from the RM550 million proceeds and may consider giving out a special dividend and invest in new businesses
  
  Scomi Marine Bhd (7045) is selling its entire 100 per cent stake each in four overseas subsidiaries and 94.9 per cent in another foreign firm, all dealing in coal transportation sector, for a total of RM550 million.
  
  The deal announced yesterday will also see Scomi Marine substantially diluting its stake in 80.54 per cent-owned PT Rig Tenders Indonesia Tbk (PT Rig) to less than one third.
  
  In return, PT Rig will have a new controlling shareholder in Portside Offshore Inc, owned by a private fund in Indonesia.
  
  The exercise will see Scomi Marine repositioning itself to become a well-capitalised marine logistics player to tap growth opportunities in emerging markets, its president Mukhnizam Mahmud said in a statement yesterday.
  It is learnt that Scomi Marine plans to pare down its debt from the RM550 million proceeds.
  
  The company may also consider giving out a special dividend and invest in new business opportunities.
  
  The five subsidiaries are CH Logistics Ltd, CH Ship Management Pte Ltd, Goldship Pte Ltd, Sea Master Pte Ltd and PT Batuah Abadi Lines.
  
  They will first be sold to PT Rig for an aggregate sum of US$171.8 million (RM549.76 million), according to the Scomi Marine statement.
  
  PT Rig will pay for the acquisitions via a renounceable rights issue involving 1.3 billion to 1.8 billion shares.
  
  Scomi Marine will renounce its entitlement to the rights shares, which will subsequently reduce its PT Rig stake to between 20.63 per cent and 24.55 per cent......
  
  
  Read more: Scomi Marine sells 5 overseas assets for RM550m http://www.btimes.com.my/Current_News/BTIMES/articles/smiku/Article/#ixzz0tWf11600

Pare down its debts? Ah...

Here's Scomi Marine last reported earnings on May 2010: Quarterly rpt on consolidated results for the financial period ended 31/3/2010. Scomi Marine has cash equivalents of 74.4 million and debts and debts of over 486.490 million. ( ah.. too much debts. :P )

And a brief look back at the past, back on 15 Feb 2005:

• Scomi keen to raise Habib stake to 46%
  
  BY B.K. SIDHU
  SCOMI Group Bhd is keen to raise its stake in Habib Corporation Bhd to 46% if given the option to subscribe to the preference shares the latter intends to issue to raise funds to buy the core marine assets and business of Singapore’s Chuan Hup Holdings Ltd.
  
  Yesterday, Habib announced a plan to buy the core marine assets and business of Singapore Stock Exchange-listed Chuan Hup for RM1.31bil, to be satisfied via a RM1.1bil cash payout and a share issuance.
  
  To raise the RM1.1bil cash, Habib will undertake a fund raising exercise that involves a share sale and a non-recourse debt.
  
  Upon completion of the exercise in the fourth quarter, Scomi will end up with 29.6% stake in Habib, while Chuan Hup will become the second largest shareholder with 28.9%. Habib managing director Meer Sadik Habib’s stake will be diluted to 16.8% from 66%. Institutional investors will have 16.3% stake and the investing public 8.4%.
  
  “Habib will incorporate a new company (newco) in Singapore. The newco will raise RM644mil in non-recourse debt to part finance the acquisition,’’ Scomi senior vice-president Hilmy Zaini Zainal told reporters in Kuala Lumpur yesterday.
  
  Besides the RM644mil in non-recourse debt, Habib will sell 174 million shares at RM1.15 per share to Scomi to raise RM200mil; propose a 1-for-1 rights issue at RM1.15 per share to raise RM85mil; undertake a 160 million preference share sale to raise RM160mil; and sell new shares to institutional investors at RM1.25 a share to raise RM120mil.....

So the five subsidiaries included in the sale by Scomi Marine are CH Logistics Ltd, CH Ship Management Pte Ltd, Goldship Pte Ltd, Sea Master Pte Ltd and PT Batuah Abadi Lines. These companies were part of Chuan Hup/Habib/Scomi deal way back in 2005.

On the Business Times article today, Scomi Marine's president justifies the sale..

• Mukhnizam said the disposals are both strategic and timely.
  
  The marine logistics and offshore support vessels businesses in Indonesia have become increasingly challenging given the intensifying competition, changes to local regulations relating to ownership and cabotage as well as pressures on charter rates.
  
  "We recognise the need for a strategic investor (Portside Offshore) that can play an integral role in growing our business," Mukhnizam added.
  
  Scomi Marine has identified India as a key focus among its targeted emerging markets for high-growth opportunities.
  
  The company, however, remains bullish on the Indonesian market as its coal production sector is expected to expand, thus increasing the need for marine logistics services.
  
  "We have selected to dispose of our existing assets today (Monday) so that we can participate and harvest greater rewards in a bigger, stronger entity in the foreseeable future," Mukhnizam noted.

A loss of disposal of rm 433 million would be incurred. What do you think of Scomi Marine's explanation of the sale?

The boss said "The marine logistics and offshore support vessels businesses in Indonesia have become increasingly challenging".

Could the investing public see the financial numbers from the five subsidiaries, CH Logistics Ltd, CH Ship Management Pte Ltd, Goldship Pte Ltd, Sea Master Pte Ltd and PT Batuah Abadi Lines, being sold?