Potential buyer eyes stake in Otto Marine

Pacc Offshore Services Holdings, the largest Asia-based international operator of support vessels for offshore oilfields in Asia, Africa and Latin America, has been named as a potential delisting candidate by CIMB Research.
Pacc Offshore Services Holdings, the largest Asia-based international operator of support vessels for offshore oilfields in Asia, Africa and Latin America, has been named as a potential delisting candidate by CIMB Research.PHOTO: PACC

Offshore marine group could be first in sector to be delisted as privatisation wave rolls in

Offshore marine group Otto Marine could be the first firm from the hard-pressed sector to be delisted amid a privatisation wave hitting the local bourse.

The mainboard-listed company called for a trading halt on Thursday morning before announcing that a potential buyer is looking to acquire shares in the group.

The stock, which last traded at 23 cents, spiked 17 per cent over the past week but is still down 19.3 per cent this year.

Otto Marine told the Singapore Exchange that it has received a letter from RHB Securities Singapore, the financial adviser to the potential buyer, which said it intends to submit a formal proposal to the group's board "as soon as possible".

The group also urged shareholders to exercise caution when dealing with its shares, adding that there is "no certainty or assurance that such an offer will materialise".

CIMB Research analyst Lim Siew Khee told The Straits Times that Otto Marine - an "unloved candidate" - may not be the most attractive asset on the market, but it is trading at a heavy discount to its book value at 0.17 times.

The group, which is 61.2 per cent-owned by Malaysian tycoon Yaw Chee Siew, has been reporting annual losses since 2011, "hit by execution issues, weak vessel orders and charter rates, and high leverage", Ms Lim noted in a report yesterday.

The report also named companies such as Baker Technology, CSE Global, Mermaid Maritime Public Co, Dyna-Mac Holdings and Pacc Offshore Services Holdings as "potential delisting candidates".

It noted that these companies are trading at a low point, and have relatively decent balance sheets or a controlling shareholder with the financial muscle and desire to control the entire entities.

Other possible candidates include ASL Marine Holdings, KrisEnergy, KS Energy, Marco Polo Marine and Pacific Radiance, which fulfil certain criteria such as having a highly-valued business that is likely to rebound if oil prices recover sharply.

Privatisations have become more common in the wider market recently, with Osim International and Eu Yan Sang International among those that have received offers to be delisted. But now the spotlight is turning to the offshore marine area.

Ms Lim believes it is only a matter of time before more privatisation deals in the sector are made.

"Buyers are probably waiting for good prices for quality assets - those that will likely see a turnaround after this down-cycle."

In the same vein, OCBC Investment Research analyst Low Pei Han said: "Indeed, talk about mergers and acquisitions and privatisation deals in the Singapore market, especially in the beaten-down offshore marine sector, has been growing in recent months."

This has been helped by the rebound in crude prices - up 85 per cent from their mid-February lows of US$27 a barrel - as the oil market continues its rebalancing in terms of demand and supply, she noted.

"We will not be surprised if there are more deals announced in the later part of this year, as price expectations between buyers and sellers narrow even further."

A version of this article appeared in the print edition of The Straits Times on June 04, 2016, with the headline 'Potential buyer eyes stake in Otto Marine'. Print Edition | Subscribe