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Straits Inter Logistics plans private placement to increase stake in Tumpuan Megah

12 Jan 2021

Malaysia-listed Straits Inter Logistics Berhad (SIL), the parent of Tumpuan Megah Development Sdn Bhd (Tumpuan Megah), on Monday (11 January) announced its proposal to undertake a private placement and an acquisition.

In the company’s filing, it stated the private placement is of up to 20% of the total number of issued shares to third party investor(s) to be identified later, while the proposed acquisition involves another 15% stake in Tumpuan Megah Development Sdn Bhd from Datuk Mohd Suhaimi Hashim for MYR 11.71 million (MYR 2.9 million) cash. 

On the private placement, the company said based on an indicative issue price of 18 sen per placement share, it is expected to raise RM28.94 million under the maximum scenario. 

The private placement is expected to be completed in the second quarter of 2021 and is intended to fund the proposed acquisition, which in turn is expected to contribute positively to the group’s future earnings. 

At present SIL holds a 55% stake in Tumpuan Megah. Upon completion of the proposed acquisition, Tumpuan Megah will become a 70%-owned subsidiary of SIL.

SIL explained its decision is based on Tumpuan Megah’s historical substantial contribution to the company’s profits as well as its future projected contributions.

As such, the acquisition of additional equity interest in Tumpuan Megah is expected to allow SIL to recognise a higher percentage of profit after tax (PAT) from Tumpuan Megah, translating to a more reflective margin result of SIL according to its controlling interest in Tumpuan Megah. 

In addition, the SIL’s board believes the group’s increased equity interest in Tumpuan Megah will contribute positively to its future net profit, based on the technical expertise and resources of Tumpuan Megah in oil bunkering services and trading of oil and petroleum products.

Such technical expertise and resources of Tumpuan Megah include, amongst others, 62 PDA Licences for the provision of bunkering services at 32 ports (at present, Tumpuan Megah has operations at 14 ports in Malaysia), 4 PDA Licences for distribution and wholesale of petroleum products and petroleum materials, 3 PDA Licences for transportation of petroleum products by oil tanker, 12 operational vessels for providing bunkering services and an established network of customers and suppliers located in countries including, amongst others, Malaysia, Singapore, Hong Kong and Indonesia.

The proposed acquisition will enable SIL to continue to leverage on the PDA Licences and operating ports of Tumpuan Megah to allow SIL to explore business opportunities at ports where Tumpuan Megah holds PDA Licences but does not currently have operations.

Singapore bunker publication Manifold Times reported SIL posted a 66% fall in its third quarter (Q3) 2020 net profit due to reduction in revenue from the oil trading & bunkering services, due to Covid-19 related economic restrictions.

Related: Straits Inter Logistics sees 66% decline in net profit; slight recovery in bunker business
Related: Straits Inter Logistics subsidiary SMF Eden acquires “M.T. MO Satu” bunker tanker for USD 4.5 million
Related: Straits Inter Logistics sees 67.8% fall in Q2 2020 profit due to Covid-19 related impact
Related: Straits Inter Logistics subsidiary Beluga Asia acquires bunker tanker to increase service availability
Related: Straits Inter Logistics IMO 2020 strategies contribute 141.2% jump in revenue for Q1

Photo credit: Straits Inter Logistics Berhad
Published: 12 January, 2021

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