Wednesday, August 23, 2006

WHY ... Scomi ... WHY???
Silence From Bursa, SC, EPU, FIC - This Is Where You Should Yell Out NO

Oil and gas support services company, Scomi Group Bhd is a company the Malays should be proud of because of its foray in the world market, said Science, Technology and Innovation Minister Datuk Seri Dr Jamaludin Jarjis. He said Scomi was one of the three local companies which had the expertise in offshore oil exploration. "Scomi's expertise is acknowledged by foreign oil companies operating in the country. We have to be proud of the achievement of Malays who have made their marks in the world market," he added.

The proposed listing of Oiltools in Singapore could see proceeds being used to fund more acquisitions, give higher dividends, or even take the group private. Scomi has proposed to list its oilfield services division (OSD) on theSingapore Exchange by the first quarter of next year. It could raise RM400 million to RM600 million. Scomi would also receive RM130 million as settlement for inter-company loan. The proceeds could be used for many things, including to offset the 30 per cent dilution effect from the initial public offering. After excluding borrowings at holding company level, the Scomi group would have more than RM100 million cash that could be used for capital repayment. Scomi could also afford a dividend payout of 50 per cent of its earnings in the immediate term, it said. At holding company level, Scomi will be in a net cash position after the OSD listing, with the post-consolidation net gearing reduced to 0.6 times from 1.5 times as at March 2006. Another option is for the major shareholders to take the group private. All the operational entities will be listed and there is no point inmaintaining a holding company that will be subjected to a holding company discount. Scomi will form a new group structure of the OSD in which the entity for the proposed listing is an investment holding company that owns 100 per cent of the restructured KMC Oiltools Bermuda Ltd - the world's fourth largest player in the drilling fluids and drilling waste management businesses.

My question is why Singapore and not Malaysia? Better valuation in Singapore? Scomi as a group was assembled together as a few local oil & gas related companies, and grew from that - why the spin off to Singapore? Arguably, KMC Oiltools is the most attractive asset of the group, and now that trading vehicle will be in Singapore. Why the silence from the authorities? I though there would be gentle persuasion from Bursa, SC, EPU, FIC, ...etc.. blah, blah... but nothing.

Not that this is a nationalistic thing or being protective, its just common sense. What defines a stock exchange? Its the companies listed on it. If 99% of companies listed on each and every exchange is the same, then there is no reason to venture out of your local exchange. An exchange's value is in the unique type of companies available for investing, allowing global and local investors to participate in that unique growth. It is fair to say ... without plantations, oil and gas, timber, rubber, gaming ... the KLSE basically looks very dull to everyone.

This is a chance for Scomi to keep the best asset in KLSE but... no, they choose Singapore, where is the loyalty, did the company even care how they got started? You just end up favouring a competing exchange, and at the same time giving the local governing bodies a slap in the face as the move probably indirectly hints at many things inherently unattractive about the local governing institutions.

If it was a chain-listing issue, surely a chat or a plea to the right authorities would get around the problem, so that is no excuse.

What is even more amazing is that with Oiltools, it would just push Singapore's listed market cap of Oil & Gas companies to be bigger than Malaysia's, ... and Singapore has zilch oil & gas in the first place??!! Yes, Datuk Jarjis, Scomi is an exemplary bumiputra company!

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