Analysts are cautious on CMS’ recent proposed acquisition of Scomi Oilfield plus 12 other companies and assets within the Oilfield Group of Companies as the acquiree companies have been loss-making, analysts opine.
KUCHING: Cahya Mata Sarawak Bhd’s (CMS) proposed acquisition of Scomi Oilfield Ltd (Scomi Oilfield) plus 12 other companies and assets within the Oilfield Group of Companies for a total RM15.75 million cash comes with earnings risk as the acquiree companies have been loss-making, analysts opine.
The research arm of Maybank Investment Bank Bhd (Maybank IB Research) recapped that CMS has entered into four conditional sale and purchase agreements (SPAs) with Scomi Energy Services Bhd (SES) and its 100 per cent subsidiary, Scomi Oiltools Sdn Bhd, to acquire a total of 13 companies, mainly involved in providing drilling fluids and drilling waste management services to the oil and gas industry.
“The proposed acquisition also includes a shop office in PJ, used as Scomi’s office, and inventories, equipment and plant and machinery,” Maybank IB Research noted.
“The total purchase consideration of RM21m will be contributed by CMS (75 per cent) and Local Capital Sdn Bhd (25 per cent) as shareholders of two acquirer companies.”
According to Maybank IB Research, Scomi Oilfield and its operating units have been loss-making in the past three financial years ending June – US$12.1 million in FY19 (15M), US$57 million in FY20, US$14.8 million in FY21.
“Plans to turn-around were not disclosed. Scomi Oilfield group was also in a Net Liability position of US$38.6 million as of end-FY21. Its balance sheet details, including group debt level, were not available.”
Besides earnings risk, the research arm is also concerned on the erosion to CMS group’s balance sheet as it consolidates the financials of the acquiree companies.
“Also unknown is the extend of equity injection (if any) required by CMS.”
Maybank IB Research gathered that the acquisition, per CMS, represents a strategic investment for it to expand and diversify into the global oil and gas sector.
“CMS also intends to leverage on Oilfield Group’s global presence in 15 markets across Asia, the Middle East, Europe and Africa to expand CMS’ clientele and into markets where the Oilfield Group has a presence.
“We however, do not see the synergy and value accretion that this acquisition brings,
for now.”
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