Investors worry the move may affect company’s future earnings

PETALING JAYA: The market reacted negatively to Petra Perdana Bhd’s sale of a 25% stake in Petra Energy Bhd, with shares in the former shedding 21% to RM1.36.

Analysts were concerned how the sale would potentially affect Petra Perdana’s future earnings. This is because the disposal reduces Petra Perdana’s stake in Petra Energy to 29.6%, hence reducing Petra Energy to an associate.

To recap, after many weeks of speculation that a dispute was brewing between the management of Petra Perdana and Petra Energy, it was finally announced last Friday that the former had disposed of 48.8 million shares, or 25%, in Petra Energy at RM1.91 per share, 4% higher than the closing price and 21% above its net tangible asset.

This off-market transaction raised gross proceeds of RM93.2mil.

Analysts were not pacified that Petra Perdana said it planned to use the proceeds from the sale to pare down bank borrowings.

What was more disturbing was that Petra Perdana would continue to seek buyers for the remaining shares to complete the disposal of its stake in Petra Energy.

The underlying message from Petra Perdana is clear: it intends to sell its entire interest in Petra Energy.

Affin Research said that at this juncture, it saw more downside risk on Petra Perdana’s share price.

Huge uncertainty arises as management has yet to clarify their intentions and plans after the complete divestment of Petra Energy, and the impact on Petra Perdana’s bottomline.

Affin was also uncertain if Petra Perdana would still own the Petroliam Nasional Bhd licence for its vessel chartering after the demerger.

This is critical to its ongoing marine support business.

ECM Libra Research’s key question was on the fate of the group’s inter-company transactions.

Typically, Petra Energy charters vessels from Petra Perdana and this generates some RM40mil to RM50mil per quarter in revenue with a margin of an estimated 10% to 15% at the operating level.

“With the split, will Petra Energy continue to seek third-party charters from Petra Perdana or will it choose other vessels?” the research house asked.

Petra Energy recently bought three new ships from Petra Perdana to reduce third-party charter but ECM Libra’s view was that this was insufficient to carry out all its jobs.

The loss of earnings from Petra Energy would be significant to Petra Perdana, possibly taking up to 10 sen of earnings per share, according to ECM.

CIMB Research, however, took a more positive stance.

“We continue to hold the view that over the long term, a separation of Petra Energy from Petra Perdana may turn out to be positive, as it could allow Petra Perdana to put its focus back on marine support, which has shown signs of recovery after the third-quarter loss.

“We understand that the average vessel utilisation rate has improved from 49% in the third quarter to more than 50% in the fourth quarter so far and that Petra Perdana is now back in the black.

“Furthermore, proceeds from the sale of Petra Energy shares could be used to accelerate Petra Perdana’s fleet expansion or renewal programme,” it said.

Meanwhile, the buyer of the 48.8 million shares is understood to be Sarawakian businessman Datuk Bustari Yusof, who also bought a smaller block of 5.4% in September.

Sources close to Bustari said that he was presently unwilling to speak, but his consultants would come out with an announcement at the appropriate time.

“Assuming the 25% block is ultimately owned by Yusof, he would now be the single-largest shareholder of Petra Energy with a 30.4% stake, just a tad higher than Petra Perdana’s 29.6%,” said CIMB Research.