Malaysia-listed bunkering firm Straits Inter Logistics (Straits) Thursday announced a proposal to acquire a 55% majority stake, or 8.25 million ordinary shares, in Tumpuan Megah Development for the consideration of RM35.75 million (USD $8.99 million).
The acquisition will be satisfied via a combination of cash payment of RM7.80 million and the remaining RM27.95 million via an issuance and allotment of 116,458,333 new ordinary shares of Straits at an issue price of 24 sen per Straits share.
Based on the 55% stake, Straits shall be entitled for a yearly profit guarantee of approximately RM2.75 million for the next two financial years.
“The Board of Straits applauded the proposed acquisition of 55% in Tumpuan Megah, which has similar core business activities as Straits,” comments Dato’ Sri Ho Kam Choy, Straits Inter Logistics Berhad Group Managing Director.
“The total profit guarantee also provides assurance on the earnings potential of Tumpuan Megah, which is expected to contribute positively to the future profitability of Straits on a consolidated basis.”
Tumpuan Megah principally engages in the oil bunkering services business, which includes ship-to-ship bunkering, barging operations and dealing in oil and petroleum products.
The company currently has operations at eight ports in Malaysia, all of which are licensed under Petroleum Development Act 1974, through seven bunkering vessels ranging between 500 to 4,700 dwt.
Dato’ Sri Ho said the proposed acquisition is a “horizontal expansion” to increase Straits’ existing business activities of bunkering services and oil trading for improved revenues moving forward.
“The proposed acquisition would enable Straits to have an immediate expansion in respect of its fleet size and assets base from the current two vessels to nine vessels for its operations,” he points out.
“With such expansion of asset base, Straits is capable to undertake higher volume of bunkering services, thereby increase its operational capacities.”
The proposed acquisition will also enlarge the customer base of Straits by tapping into the existing customer base of Tumpuan Megah, allowing Straits to capture larger market share and increase its market presence in the bunkering services industry in Malaysia to improve its competitiveness and sustainability in the marine logistics industry.
Straits posted a 57% increase in revenue for the quarter ended 31 March 2018 (Q1 2018) due to the start of a bunkering services contract which came into effect in the fourth quarter of 2017.
In January, the firm also entered into a nonbinding Heads of Agreement with Hong Kong-based bunker trading firm Banle Energy International Limited to explore potential business cooperation and/or collaboration opportunities.
Related: Straits Inter Logistics Q1 revenue up 57%
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Related: Straits Inter Logistics: Positive outlook for Malaysia bunkering sector
Related: Malaysia-listed bunkering firm Straits Inter Logistics net profit up 27 times
Related: Straits Inter Logistics and Banle Energy explore bunker business opportunities
Photo credit: Straits Inter Logistics
Published: 7 June, 2018
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