Ramunia takes the risky path

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KUALA LUMPUR: Oil and gas company Ramunia Holdings Bhd seems to be taking a relatively large risk, purchasing a floating production Storage and offloading (FPSO) vessel, the MT Laurita, without an attached contract.

Nevertheless, Ramunia shareholders yesterday approved the acquisition, which will set the company back by US$82.5 million or RM251.62 million in cash, funded via a mix of internally generated funds and borrowings.   

Ramunia CEO Nor Badli Mohd Alias admitted to the risk but added that the move was “a calculated risk” and the company is likely to bag a contract after the vessel is delivered.

Considering the high capital expenditure, most companies will opt to acquire assets which have locked-in contracts to help in the servicing of loans.

“We need to have a vessel before we can participate in tenders. We are purchasing on a speculative basis so once we’ve bought the vessel we will be able to submit proposals to various oil companies and deploy the vessel,” Badli said, adding that borrowings had already been secured.  

He said the company had already started negotiations and submitted tenders for FPSO jobs. “We participated in one tender in Vietnam. We are one of the three bidders for the tender,” he added, declining to elaborate.

He said Ramunia’s plan to acquire the FPSO is to stabilise and diversify its earnings base, considering the volatility in oil prices may hamper exploration works and thus adversely impact the company’s mainstay in fabrication.

Badli: Ramunia is one of the three bidders for a tender in Vietnam.

The company is one of only six licensed by state-controlled oil major Petroliam Nasional Bhd  (Petronas) to conduct fabrication works.   

Ramunia is in the midst of acquiring a 56-acre (22.4ha) fabrication yard from OilFab Sdn Bhd, a company linked to beleaguered Oilcorp Bhd, for RM83.8 million via a mixture of cash and shares.  

The yard is central in Ramunia’s effort to come out of the Practice Note 17 (PN17) category of cash-strapped companies. Ramunia had fallen into this category after it sold its 170-acre fabrication yard to Sime Darby Bhd a few years ago for RM515 million in cash.

Ramunia has already gained the vacant possession, but the process of acquisition is still ongoing.

“The issue with the OilFab yard is that we are still complying with the conditions for the acquisition.

“We obtained vacant possession in March after we signed the sale and purchase agreement. We have over 60 people occupying the yard today and have started small fabrication works that include boring piles,” Badli said.

This yard is also key to Ramunia’s tie-up with India’s Sew Infrastructure Ltd. Both are participating in bids for platforms with Oil and Natural Gas Corp of India (ONGC).  

In 2008, ONGC blacklisted Ramunia for a two-year period as the company had an issue with a US$685 million (then RM2.2 billion) job awarded to it. According to Badli, the blacklist ended in May this year and Ramunia with partner Sew Infrastructure are returning to India for more opportunities.

“ONGC’s blacklist is over. We sent a delegation there to meet and explain to ONGC the difficulties previously faced by Ramunia. They understood our problems. We also have a reputable local engineering company as a partner,” Badli said, referring to Sew Infrastructure.

“This year we are focusing on bringing up revenue to a level the SC (Securities Commission) is happy with,” he said, adding that Ramunia hopes to see a slight profit in FY11.

Fo rthe nine months ended July 2011, Ramunia posted a net profit of RM4.55 million on a revenue of RM3.28 million in revenue. For the corresponding period a year ago, it reported a net profit of RM35.42 million on RM33.87 million in revenue.

Ramunia gained one sen to close at 44 sen yesterday, with 8.8 million shares changing hands.

The company’s largest shareholder is pilgrim fund Lembaga Tabung Haji, which has 25.17% equity interest. Other substantial shareholders are Datuk Azizul Rahman Abd Samad, with a 5.09% stake.

Azizul is the former controlling shareholder of Ramunia who has been divesting his equity on the open market.

This article appeared in The Edge Financial Daily, September 14, 2011.

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