Mokhzani exiting oil and gas business
He’s now looking to sell entire 10.1% stake in Sapura Energy
PETALING JAYA: Tan Sri Mokhzani Mahathir, who spotted the trend of investing in the oil and gas (O&G) industry some 15 years ago, is completely exiting the sector as sentiment in crude oil prices picks up.
In the latest development, he is looking to sell his entire 10.1% stake or 605 million shares in Sapura Energy Bhd via a private placement. The shares are held by his private vehicle, Khasera Baru Sdn Bhd.
Maybank Investment Bank has been said to be given the mandate.
The exercise is to be done at an offer price that ranges between RM1.42 and RM1.49, representing an 8% to 12.3% discount to Sapura Energy’s closing price of RM1.62 on Wednesday. At this price range, the deal size is roughly between RM859.1mil and RM901.5mil.
Its bookbuilding exercise started yesterday and is expected to be settled on Nov 7.
Shares of Sapura Energy were down 13 sen to RM1.49 yesterday on a volume of 79.85 million shares.
On a year-to-date basis, the stock is now down 8.64%, giving it a market capitalisation of RM8.87bil.
Mokhzani has been paring down his stake in Sapura Energy over the years. Sources said that he does not foresee the O&G industry turning around anytime soon, and would rather deploy the capital into new industries.
“He doubts the price will hit RM3 for a long time to come, as sentiment remains weak,” said a source.
Notably, in February 2014, four months before the collapse of crude oil prices, Mokhzani via Khasera Baru had sold 190.3 million shares in SapuraKencana Petroleum Bhd (SapKen) at a price of RM4.30 apiece. This gave them proceeds of RM820mil. Sapura Energy was formerly known as SapKen.
Prior to that in 2013, Mokhzani and his business partner Datuk Yeow Kheng Chew, better known as K.C. Yeow, had also left the board of Sapura Energy.
With this move, it looks like Mokhzani is not just exiting Sapura Energy, but also the O&G business.
Last year, he exited Yinson Holdings Bhd, a company that operates floating production, storage and offloading vessels catering to the O&G industry. That exit was via a restructuring exercise of Mokhzani’s company Kencana Capital Sdn Bhd.
The restructuring involved Yeow acquiring Kencana Capital’s stake in Yinson.
Yeow acquired the 119.71 million Yinson shares at RM3.07, as well as 33 million more shares in Yinson, which were distributed to him by Kencana Capital by way of a dividend in specie. This gave Yeow a collective stake of 14% in Yinson.
Yinson has been one of Kencana Capital’s better investments. Recall that Yinson’s shares rallied like no other back in 2013, rising almost 200% on a year-to-date basis, when Kencana Capital first emerged with a 4.54% stake, and subsequently when it took another placement amounting to a 14.64% stake in the company.
For the second quarter to July 31, 2017, Sapura Energy recorded a net profit of RM28.93mil from RM112.27mil previously. This was on the back of an almost unchanged revenue of RM1.66bil.
This was due to the lower revenue from its drilling business segment and the financial impact arising from the cessation of the Berantai risk service contract.
For the six-month period, it recorded a net profit of RM56.46mil from RM222.58mil previously. Revenue reduced to RM3.43bil from RM3.62bil previously.
Of the 21 analysts covering Sapura Energy in a Bloomberg poll, there are six “buy” calls, nine “hold” calls and six “sell” calls. The 12 consensus target price is RM1.63.
In an Oct 19 report, analyst Alex Goh said that in the absence of significant new order wins, the group’s order book had decreased 11% quarter-on-quarter to RM15.1bil as of the second quarter. “While the group is hopeful for further wins with tender prospects worth US$8.2bil, the pace of awards is still slow currently,” he said.
He said that the stock was now trading at a pricey financial year 2019 price-earnings ratio of 40 times, but is cushioned by a 31% discount to its book value of RM2.15 per share.
Sapura Holdings Sdn Bhd and the Employees Provident Fund are the two current largest shareholders of the company with 16.8% and 11.2% stakes, respectively.