KUALA LUMPUR: Scomi Group Bhd has laid out plans for growth and recovery through its expanded balance sheet following the proposed group-wide consolidation with listed subsidiaries Scomi Engineering Bhd and Scomi Energy Services Bhd.
Scomi Group chief financial officer Mukhnizam Mahmud said the next step is to raise capital to pare down debts and look for growth opportunities by taking advantage of the bigger balance sheet.
He said divestment of certain non-core assets for about US$50 million (RM214 million) is only the first step and the group could be looking at the debt market to restart its growth phase.
The group has not set any target on when it would return to the black but Mukhnizam is adamant that the right steps are being taken to increase the chances.
In the group-wide merger, Scomi’s two listed units will be privatised and delisted from Bursa Malaysia through a non-cash corporate exercise involving share swap and issue of warrants.
It also proposed a share consolidation of every two existing Scomi Group shares into one ordinary share and a bonus issue of seven warrants for every 10 consolidated Scomi Group shares.
Scomi Group, which currently has 65.6 per cent stake in Scomi Energy and 72.3 per cent stake in Scomi Engineering, will be operating as a single entity by March next year, the beginning of its 2019 financial year.
Mukhnizam said to improve its top line and the bottom line, the group is selling its vessels and other non-core assets for a minimum of US$50 million, diversifying its revenue streams to explore renewable energy business as well as bidding for more rail projects locally and internationally.
“We believe we still can get value for those vessels and other non-core assets. We are in talks with certain parties which are our foreign partners. We are taking conservative view on the assets valued at US$50 million. If we were to succeed, the value will be beyond that.
“We expect our venture into renewable energy such solar, hydro and wind power to contribute to our profit after two years. We are also working with Chinese parties on rail projects,” he said after Scomi Engineering’s annual general meeting here.
The vessels and other non-core assets have cost impairment losses. Slow drilling activities have also reduced the utilisation rate of the vessels in the past few years.
Scomi Energy has debts amounting to RM245 million while Scomi Engineering has debts of RM526 million.
The order book for its oil and gas segment stood at US$700 million and rail contracts at RM1.9 billion.
Mukhnizam said the group may change its core business over time, depending on the business environment of rail and oil and gas industries.
He said the consolidation exercise is fair for all stakeholders as the single entity will be able to have more flexibility in the use of resources, improve its balance sheet and streamline the organisational structure for easier decision-making process.