This article first appeared in The Edge Malaysia Weekly on July 8, 2024 - July 14, 2024

MISC Bhd (KL:MISC) is believed to be in talks with the shareholders of Bumi Armada Bhd (KL:ARMADA) and could take up a substantial stake in the floating production storage and offloading (FPSO) player, sources familiar with the matter tell The Edge.

It is understood that base-level negotiations have been going on, but they have not reached any significant level.

In an emailed response to questions from The Edge, MISC says, “MISC actively explores investment opportunities that have the potential to add value to its shareholders. MISC will certainly communicate with relevant stakeholders if and when there is material development.”

No questions were sent to Bumi Armada as the talks are understood to be at the shareholder level and not involving the company’s management.

Bumi Armada’s largest substantial shareholders are billionaire businessman Tatparanandam Ananda Krishnan, who has a 34.58% stake; various funds under state-­controlled asset management outfit Permodalan Nasional Bhd, with a 13.25% stake; and privately held Saluran Abadi Sdn Bhd, the vehicle of Farah Suhanah Ahmad Sarji, with a 6.08% stake.

A check on its website shows that Bumi Armada wholly owns three FPSOs: Armada TGT1, Armada Kraken and Armada Olombendo. It jointly owns four other FPSOs: Armada Sterling I, Armada Sterling II, Karapan Armada Sterling III and Armada Sterling V.

It also has a wholly-owned liquefied natural gas floating storage unit, Armada LNG Mediterrana, and two vessels — Armada Installer and Armada Constructor — which undertake pipe laying and umbilical laying, among others.

In a nutshell, Bumi Armada is among the world’s largest FPSO players. To put things in perspective, as at end-March this year, the company had total assets of RM11.59 billion.

For its first quarter ended March this year, Bumi Armada chalked up a net profit of RM240.54 million on the back of RM635.54 million in revenue. For the corresponding period a year ago, the company raked in RM201.01 million in net profit from RM543.99 million in sales.

For the period in review, Bumi Armada had deposits, cash and bank balances of RM901.76 million. On the other side of the balance sheet, it had short-term borrowings of RM2.3 billion and long-term borrowings of RM1.99 billion. The company had reserves of RM1.75 billion. Its net cash flows generated from operating activities was at RM271.93 million for the first three months of the year.

At its close of 58 sen last Friday, Bumi Armada had a market capitalisation of RM3.44 billion. The stock is up 17.2% year to date (YTD).

Several years ago, Ananda Krishnan was believed to be looking to exit Bumi Armada, and one of the parties courting him was Shapoorji Pallonji Mistry of the Tata group, who was on the board of Bumi Armada from October 2014 to February 2017. However, nothing concrete has taken place since then.

MISC is among the largest companies on Bursa Malaysia, with a market capitalisation of RM39.19 billion, based on its closing price of RM8.78 last Friday. Its share price hit a multi-year high of RM8.97 in intraday trading on July 3, and has gained more than 23% YTD.

MISC, 51%-controlled by Petroliam Nasional Bhd (Petronas), is the Malaysian oil company’s transport arm. The group is also among the world’s largest FPSO owners and operators, with 12 assets.

MISC has more than 100 vessels. The company wholly owns AET Tanker Holdings Sdn Bhd (formerly American Eagle Tankers) and has a 66.5% stake in publicly traded oil and gas (O&G) fabricator Malaysia Marine and Heavy Engineering Holdings Bhd (KL:MHB), among a host of other assets. As at end-March this year, MISC’s total assets were pegged at RM66.6 billion.

Interestingly, MISC has a 20% stake in FPSO Ventures Sdn Bhd — a company involved in operations and maintenance services for offshore floating systems in the O&G sphere. The remaining 80% is held by Ombak Simfoni Sdn Bhd, the vehicle of businessmen Datuk Ahmad Fuad Md Ali and Datuk Abdul Farish Abd Rashid.

Ahmad Fuad and Abdul Farish, via privately held Ombak Damai Sdn Bhd, were the substantial shareholders of Bumi Armada until July 2016. Ombak Damai’s shareholding in Bumi Armada was pared to 0.6%, or 36 million shares, according to its latest annual report.

For its first financial quarter ended March 2024, MISC reported a net profit of RM759.9 million on the back of RM3.64 billion in revenue. For the corresponding period a year ago, the company registered a net profit of RM612.9 million against revenue of RM3.08 billion.

For the period in review, MISC had cash, deposits and bank balances of RM7.47 billion. The shipping giant had long-term debt commitments of RM16.04 billion and short-term borrowings of RM2.07 billion. Its retained profit was RM19.72 billion, with reserves of RM12.12 billion. 

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