This article first appeared in Corporate, The Edge Malaysia Weekly, on June 6 - 12, 2016.

WHEN it was announced last November that Amir Hamzah Azizan was leaving his post as CEO of Petronas Lubricants International, many were surprised, as the Petroliam Nasional Bhd (Petronas) subsidiary was a billion-dollar business that was doing well and had international exposure.

Amir did, after all, possess Petronas DNA, being the son of revered former chairman Tun Azizan Zainul Abidin. Prior to joining Petronas, he had had a 10-year stint with Royal Dutch Shell.

It was perhaps even more surprising that he was joining Icon Offshore Bhd, a smallish company controlled by Ekuiti Nasional Bhd (Ekuinas). It had a market capitalisation of about RM430 million and was trying to stay afloat in the aftermath of tumbling oil prices.

In an interview with The Edge, Amir explains, “I joined Icon as managing director in March this year, after a very long courtship — almost more than a year.

“For it (Icon) to actually leap to the next stage of its life, it needed to evolve into a different sphere. In the process of evolving into a different sphere, it needed a lot more corporate-like processes, so Ekuinas talked to me for a long time about coming in to help them,” Amir says.

But there could be other more persuasive reasons for Amir to join Icon — to spearhead the consolidation in the fragmented offshore support services segment of Malaysia’s oil and gas industry.

To put things in perspective, with 33 offshore support vehicles (OSVs), Icon is the largest pure-play OSV provider in Malaysia and one of the largest in Southeast Asia in terms of the number of OSVs, according to Infield Systems, which does energy research and analysis.

It is also the only government-linked company with the OSV segment as its core business.

Amir says, “Ekuinas is extremely keen to do it (consolidation), because they can be the first mover and it makes logical sense. Second, I think because of the fragmentation (in the industry), it also means that we need catalysts … why do it, if you cannot show that one plus one is three. At the end of the day, great businesses look for opportunity and they’ll grab it (the opportunity) and run with it. Here, it is a confluence of a lot of things … aligning and building up,” he says.

Government-owned private equity firm Ekuinas owns 42.57% of Icon, and according to its 2015 annual report, has RM4.1 billion in funds under management.

But then again, the going is likely to get tough, and Icon itself could be doing better (see accompanying story).

Difficulties with consolidation 

First, the oil and gas industry is very political, with the likes of the Malay Economic Action Council, Pertubuhan Pribumi Perkasa (Perkasa) and well-connected businessmen who have oil and gas assets trying to maintain their grip on the award of jobs.

Whether they will give up their assets for the betterment of the local oil and gas industry remains to be seen.

A former oil and gas analyst says there will be difficulty in consolidating the assets as the share prices have plummeted, and the owners are likely to look for steep premiums if they do sell.

For instance, Alam Maritim Resources Bhd’s shares, which hit a multiple-year high of RM1.65 in April 2014, has since plunged nearly 80% to trade below the 35 sen band.

The company’s net asset per share as at end-March was 93 sen, about 165% higher than its trading price.

Dayang Enterprise Holdings Bhd’s share price has slipped more than 70% from its high of RM3.77 in March 2014 to about RM1.08 currently. The company’s net asset per share as at end-March was RM1.26, or about 16% higher than its trading price.

Even the resilient Petra Energy Bhd’s share price shed nearly 60% from RM2.87 in June 2014 to just below RM1.20 currently. As at end-March, Petra Energy’s net asset per share was RM1.66, or about 40% above its trading price.  

The analyst highlights that strong personalities in the many oil and gas companies are unlikely to give up control of their outfits. One such person is Tan Sri Bustari Yusuf, controlling shareholder of Petra Energy with a 27.54% stake. Other substantial shareholders of Petra Energy include Wah Seong Corp Bhd, which is controlled by the Tan family with 26.97% equity interest. The Tans also control IGB Corp Bhd.

Datuk Mohamed Nizam Abdul Razak, the brother of Prime Minister Datuk Seri Najib Razak, is also a substantial shareholder in Petra Energy with a 9.11% stake, while Pilgrim fund Lembaga Tabung Haji has 9.88%.

Dayang Enterprise is 29.06%-controlled by Sarawakian powerhouse Naim Holdings Bhd. Wong Siew Hong holds 20.52% equity interest and the Ling family, which runs the company, has about 20%.

Another company is Jasa Merin (M) Sdn Bhd, which is 70%-owned by Silk Holdings Bhd. Silk Holdings in turn is 28.95%-controlled by Abdul Rahman Ali. Corporate personality Datuk Mohd Azlan Hashim holds 22.87% and Johan Zainuddin Dzulkifli, 15.46%. Jasa Merin has a fleet of 19 ships.

There is also the issue of Icon’s chequered past, which may hamper the merger plans.

To recap, in late April last year, Icon’s former CEO Dr Jamal Yusof and chief operating officer Rahman Yusof were released by the Malaysian Anti-Corruption Commission (MACC) after being remanded for a few days. They went on a six-month leave of absence to assist in the MACC’s investigations and nothing more was heard about the duo.

When asked about the chequered past, Amir says curtly, “I don’t look backwards, I look forward.”  

Icon was listed on June 25, 2014, and debuted at RM2.10, which was a 13.5% premium to its initial public offering reference price of RM1.85. The company raised RM1.09 billion in a glitzy flotation exercise, but with the dampened sentiment, Icon is now trading at below 40 sen.

Then there is also the issue of finding a strategic fit as there are different asset classes in the OSV segment.

Will Amir succeed in his endeavour to consolidate the OSV industry? “We’re looking at it (consolidation). The board (of Icon) is quite actively engaged in looking at where the next leg is going to be. The first was to ensure that we ride out the storm, and now it is the time for moving forward,” he says in conclusion.

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