OSK surprised with Dayang’s purchase of Borcos stake

KUALA LUMPUR: OSK Research said Dayang Enterprise Holdings Bhd’s acquisition of a 40 per cent stake in Syarikat Borcos Shipping Sdn Bhd came as a surprise given the relative sizes of the two companies.
Borcos is the second largest vessel operator in Malaysia after Bumi Armada Bhd, with 33 vessels in its stable that mainly service the oil and gas (O&G) majors in the country.

“Nevertheless, we believe this is a natural course in the country’s O&G industry.

“In fact, we had earlier expected some consolidation to take place given that the slowdown in the global economy has curbed demand for O&G services,” OSK said in its investment research report yesterday.

On Wednesday, Dayang announced that it had entered a sale-and-purchase agreement with AWH Equity Holdings Sdn Bhd (AWH) for the acquisition of 40 per cent equity in Borcos.

The deal comes with a profit guarantee of RM65 million for the financial year ending Dec 31, 2010.

OSK said there were two main synergies arising from the acquisition.

First, Dayang whose core business is in the provision of brownfield services, would need a bigger fleet in order to expand its operations.

Second, both companies have significant operations off the cost of Sabah and Sarawak.

“Also we believe both are trying to become bigger to prepare themselves for the spillover of jobs from the RM3 billion Petronas contract for the transpor-tation and installation of pipelines,” OSK said.

Based on the profit guarantee, it said, the acquisition would boost Dayang’s next year earnings by 40 per cent.

Following the acquisition, OSK raised its earnings forecasts for Naim Holdings Bhd for the financial year 2010 and 2011 by 10.5 and 7.1 per cent respectively.

Dayang is Naim’s 36 per cent associate.

Dayang Enterprise owns and operates four work boats and one supply boat under its wholly-owned subsidiary DESB Marine Services Sdn Bhd.

Syarikat Borcos Shipping has been a leading provider of offshore support marine vessels to the oil and gas industry in Malaysia over the past 28 years.

Alongside its fleet of 33 vessels, Borcos plans to add six more units to its fleet by the end of this year and two additional units of offshore support vessels with dynamic positioning features (DP2) by 2011.

The DP2-enabled vessels will allow SBSSB to venture into deepwater work.

— Bernama