This article first appeared in The Edge Malaysia Weekly on September 11, 2023 - September 17, 2023

THE share prices of some Sarawak-based companies have been rising in recent months, including that of diversified group Naim Holdings Bhd and its subsidiary Dayang Enterprise Holdings Bhd, which controls Perdana Petroleum Bhd.

Naim’s share price hit an intra-day high of 97.5 sen on Sept 4. The stock has gained by more than 70% from the low of 50 sen on May 31. Trading volume has also swelled of late.

Some attribute the sharp rise in Naim’s share price to the big jump in Dayang Enterprise’s share price and its 63.67%-owned unit Perdana Petroleum’s turning profitable in the first six months ended June 30.

Dayang, in which Naim holds a 24.22% stake, soared to a more than three-year high of RM1.98 on Sept 4. The oil and gas (O&G) firm’s share price has gone up 51% from RM1.17 on May 31.

Meanwhile, offshore support vessel player Perdana Petroleum’s shares also surged to a more than three-year high of 27.5 sen on Sept 1, a 70% increase since mid-June.

There is much speculation as to what is going on at the three related companies, but sources close to Naim and its shareholders have been tight-lipped.

“It’s oil prices (that are causing the excitement at Naim, Dayang and Perdana). Oil prices were just above US$90 per barrel today (last Thursday), and have gained almost 25% since June,” one source familiar with the three companies says when commenting on their share price jumps.

When asked, another executive of Naim denies that there is a possible privatisation exercise. “Maybe you know better than me,” he quips.

Naim is largely a property and construction player, with interests in oil and gas via Dayang, which is involved in the maintenance, fabrication and hook-up and commissioning sphere, and Perdana Petroleum, which is in the offshore support segment.

At the closing of 85 sen last Thursday, Naim’s market capitalisation had expanded to RM425.6 million. The stake in Dayang is perceived as its prized asset, along with 1,445 acres of land and a hotel in Bintulu.

Naim’s 24.22% stake, or 280.4 million shares, in Dayang is valued at roughly RM496.3 million at RM1.77, last Thursday’s closing price. The value of the block of Dayang shares is about 16% more than Naim’s market cap.

Should there be a privatisation, Naim’s controlling shareholder Datuk Hasmi Hasnan, who owns direct and indirect stakes totalling 38.14%, will need to offer a premium over 85 sen, considering the value of the stake in Dayang, in order to succeed.

Furthermore, Naim’s net asset per share as at end-June was RM2.49. Its total assets were pegged at RM1.82 billion.

Nonetheless, the high valuation of the Dayang stake indeed has made the distribution of Dayang shares and cash an option for the controlling shareholder and the parties acting in concert to pave the path for privatisation.

As at end-June, Naim’s cash and cash equivalents was RM225.84 million, while its short-term debt was at RM140.31 million and long-term borrowings amounted to RM76.84 million.

The offerors could utilise the cash pile, provided they are willing to take over the debts. Naim’s share capital is 500.7 million shares.

Managing director Hasmi and his partner, chairman Datuk Abdul Hamed Sepawi, also hold a 14.68% indirect stake, via Tapak Beringin Sdn Bhd and other vehicles, and a 6.5% direct stake. They collectively hold 59.32% of Naim.

Abdul Hamed is a cousin of Sarawak governor Tun Abdul Taib Mahmud, 87, who is said to be unwell and recuperating overseas. In mid-August, Sarawak State Legislative Assembly Speaker Tan Sri Mohamad Asfia Awang Nassar was sworn in as acting governor.

In hindsight, a privatisation exercise would have cost a lot less had it been carried out slightly more than three months ago. Naim’s share price was at 50 sen on May 31, giving it a market cap of RM250.35 million, while Dayang’s was at RM1.17, giving it a market cap of RM1.354 billion. Naim’s block of Dayang shares was worth RM327.93 million. The valuation gap was wider, at 31%. The option of distributing Dayang shares would have been even more attractive then.

It is believed that such a plan was presented to the controlling shareholder a few months back. Given the big jump in Naim’s and Dayang’s share prices, the plan could have been shelved as valuations would have varied since, says another source.

With exploration and development activities picking up, coupled with the recent rebound in crude oil prices, investment analysts are upbeat on Dayang.

According to Bloomberg, all seven analysts tracking the counter are recommending it with an average target price of RM1.96. CGS-CIMB has the highest target price of RM2.50.

For the six-month period ended June 30, Dayang registered a net profit of RM48.74 million on revenue of RM418.15 million. For the previous corresponding period, the company recorded RM55.78 million in net profit on the back of RM423.54 million in sales.

CGS-CIMB expects Dayang’s outlook for the second half of 2023 (2H2023) to be healthy as the integrated O&G service provider has seen a successful tender for an asset integrity backlog clearance (ABC) contract and better-than-expected margins for its core operations.

As at end-June, Dayang had cash and cash equivalents of RM136.46 million, and long-term borrowings of RM233.42 million and current liabilities of RM137.7 million. It had reserves of RM620.46 million.

Its unit Perdana Petroleum — which has accumulated losses of RM245 million — seems to have turned the corner with a net profit of RM8.65 million on revenue of RM81.63 million for its second quarter ended June 30, in contrast to a net loss of RM6.5 million on lower revenue of RM43.17 million a year ago. This could also have nudged its share price northwards, besides the strong oil prices.

As at end-June, Perdana Petroleum had cash and cash equivalents of RM34.89 million, and long-term debt commitments of RM22.11 million and current liabilities of RM14.85 million.

The company has garnered new, albeit small, contracts recently. In mid-June, it bagged a RM4.3 million two-month contract to provide RMS Synergy Sdn Bhd with an anchor handling tug, while in early September, it secured a 60-day extension for the charter of a vessel by Petronas Carigali Sdn Bhd valued at RM16.3 million. On Aug 9, it announced two contracts for two vessels valued at RM21.9 million from Petronas Carigali.

Perdana Petroleum has a fleet of 15 vessels — eight anchor handling tugs, five work barges and two work boats. As at end-June, its net asset per share was 29 sen. 

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