Tuesday, October 16, 2007


Scomi Marine, Back On Radar Screen

On September 4, 2007 EPF collected another 36.84m shares in Scomi Marine and now holds over 5% of the company. Catalysts include the probable sale of its 29% stake in CH Offshore Ltd. The sale should proceed because the price that can be obtained now will be very high on historical standards. Plus, Scomi Marine could put the proceeds to better synergistic use by focusing on specialty vessels such as barges, which gives better margin and sees better demand. The stake was acquired for 40 Singaporean cents a share. At the time of writing, Ch Offshore trades around S$1.00.

The move is likely because Scomi Marine has RM340.8m in debt. If we look at Scomi Marine's current share price of between RM1.21-1.25, the stake in CH Offshore alone is worth 60 sen minimum. The sale is also likely because even though it has a 29% stake, Scomi Marine does not really have a say in management. More importantly, it can only equity account the results and basically rely on dividends from CH Offshore for actual positive contribution to cash flow. It makes sens to own a lot more or to sell off the stake. The former is highly unlikely.

Another buffer is that the book value is almost 1 to 1 with its share price. For 2007, net profit should come in at RM77m or an EPS of 10.4 sen. The estd. net profit for 2008 is circa RM100m or 13.6 sen. Forward PER outlook is undemanding relative to share price.

Operationally things are not that good, its OK, but I wouldn't buy for their operations. I am interested in it as a probable catalyst in the works, for a swift trade. As the potential sale of CH Offshore should very likely lead to an exaggerated special dividend of 40-50sen. Target price when sale occurs, RM1.60.

5 comments:

lovesoccer88 said...

ScomiMR still able to pay so special dividend? I feel doubtful. As u say they still need to pay their debt and if have extra cash, they can do other investment as what u have said in your article.

deborah said...

Just a quick comment.. goodwil on consolidation accounts for close to 50% of the net asset.

Salvatore_Dali said...

yes, they will probably pay a special dividend, instead of whacking down all debt... yes, goodwill is very high, like i said, operationally i'm not into the stock, just for a trade ...their probability to doing the special dividend stems from many reasons which may not be appropriate to elucidate here...

solomon said...

Likely for special dividend (SD)/ capital gain(CG). Study the shareholder trend, Shah Hakim bought substanstial stakes recently.

For the past, he had not disappoint investors.

My call is to adopt "Momentum buying". My TP = RM1.50

Rohit said...

dali,
Can I know when this sale going to happend?

Kumar