This article first appeared in The Edge Malaysia Weekly on June 24, 2024 - June 30, 2024

EKUITI Nasional Bhd’s (Ekuinas) sale of its shipping unit Orkim Sdn Bhd is understood to have come down to a two-horse race between one party led by Sarawak-based Hubline Bhd (KL:HUBLINE) and another by privately held Powertium Marine Sdn Bhd.

Ekuinas’ asking price is believed to be approximately RM1.2 billion, which is considered high by many in the industry. Both bidders are understood to have come up with bids in the region of the asking price.

It is understood that Hubline is seeking the support of the Sarawak government and could persuade other state-linked maritime outfits to strengthen its bid, but this remains conjecture at press time.

Powertium Marine, meanwhile, is understood to have managed to secure funding and found a minority partner in DS Asset Management LLC, a Dallas, Texas, fund manager, with which to form a joint venture with the requisite clout and finances for the acquisition.

Powertium Marine is understood to have brought in CIMB Investment Bank to advise and support it on the bid, in order to demonstrate its funding capability.

In an email response to questions from The Edge, an Ekuinas spokesperson says, “As a private equity firm, Ekuinas upholds a strict due diligence and review of any opportunities for investments or divestments. This is carried out with the best interests of our stakeholders [in mind] and in line with our robust corporate governance framework.

“Should there be any announcements pertaining to our investments or divestments, we will update accordingly.”

The Edge did not obtain any comment from Hubline, but when queried last month by the stock exchange on its interest in Orkim, Hubline had said: “We have had discussions with Ekuinas to explore this opportunity. These discussions are at a preliminary stage, and we are assessing the feasibility and strategic alignment of such an acquisition with our long-term goal.”

A source familiar with Hubline says of the enlisting of other parties to strengthen its bid: “It’s all just rumours” and refused to elaborate.

Datuk Abdul Aziz Ali of Powertium Marine also declined to comment, possibly because there are non-disclosure agreements in place.

Ekuinas, a government-controlled private equity (PE) fund, was established in September 2009 “to promote equitable and sustainable bumiputera wealth creation and economic participation based on the principles of market-friendliness, merit and transparency via the creation of Malaysia’s next generation of leading companies”.

Generally, PE funds such as Ekuinas have a four- to six-year horizon to create value in a company before exiting. However, Ekuinas has held on to Orkim for almost 10 years, which could explain the high selling price being sought.

To recap, Ekuinas bought a 95.5% stake in Orkim back in December 2014 for RM346.3 million from Global Maritime Ventures Bhd, a subsidiary of Bank Pembangunan Malaysia Bhd.

Orkim has a fleet of 18 vessels that transport clean petroleum products from refineries to various oil storage facilities and a 40% share of the business in Malaysia. The average age of its vessels is stated as 10 years. According to its website, five are three years old while the rest were built between 2009 and 2016 with an average age of 13 years.

For its financial year ended December 2022 (FY2022), Orkim made a profit after tax of RM27.94 million from revenue of RM315.58 million. This would make the RM1.2 billion price tag almost 43 times its FY2022 earnings. However it has to be pointed out that all shipyards are currently full and the waiting period to build new vessels is in the region of 18 months, which could explain the high price tag.

As at end-2022, Orkim had total assets of RM911.56 million, total liabilities of RM531.51 million and retained earnings of RM335.72 million.

In a nutshell, Hubline’s earnings are two-pronged — a dry bulk shipping arm; and a flying academy and general aviation services.

According to its website, Hubline has a fleet of 23 tugs and barges, operating in Southeast Asia, specifically in Cambodia, Indonesia, Malaysia, the Philippines, Thailand and Vietnam.

Hubline is 18.31% controlled by its managing director Dennis Ling Li Kuang while executive chairman Datuk Richard Wee Liang Huat @ Richard Wee Liant Chiat has 18.08% equity interest. The only other substantial shareholder is Ikhwan Zaidel who has a 6.78% stake in Hubline.

Another noteworthy shareholder is Datuk Ibrahim Baki, who, according to Hubline’s FY2023 annual report, had almost 3% as at end-December last year. He was executive chairman of Hubline until October 2020 and currently sits on the board of national oil company Petroliam Nasional Bhd (Petronas).

Ibrahim, who is the Satok assemblyman, was appointed as Gabungan Parti Sarawak’s State Legislative Assembly chief whip.

While the talk of Hubline bringing in other parties to strengthen its bid is not verifiable, the market scuttlebutt has it that Sarawak, after setting up Petroleum Sarawak Bhd (Petros), is now looking to form a shipping company to ferry petroleum products, much like how Petronas has a 51% stake in shipping outfit MISC Bhd.

Other assets under the Sarawak government involved in the maritime sector that could make up the pieces of the puzzle include Bintulu Port Holdings Bhd, which operates one of the largest liquefied natural gas export terminals in the world.

Bintulu Port — which is 26.67% controlled by the State Financial Secretary Sarawak, 15.04% by state-controlled entity Equisar Assets Sdn Bhd and 28.51% by Petronas — is in the process of being transferred to the state government’s control as opposed to the federal government. It is understood that the shift is likely to happen next month.

Hubline, for its six months ended March this year, suffered a net loss of RM124,000 on revenue of RM104.76 million. In the previous corresponding period, the shipping company posted a net profit of RM3.65 million on revenue of RM122.54 million.

As at end-March this year, Hubline had short-term investments of RM25.26 million and cash and cash equivalents of RM19.43 million. On the other side of the balance sheet, the company had short-term borrowings of RM62.61 million and long-term debt commitments of RM26.89 million.

Hubline’s accumulated losses at the end of the period in review amounted to RM55.2 million.

Powertium Marine, meanwhile, is understood to have been in talks with Ekuinas to acquire Orkim for more than two months and had upped the ante with a strong offer last week.

A search of the Companies Commission of Malaysia filings indicates that Powertium Marine is 55.04% controlled by Powertium Engineering Sdn Bhd and 44.96% by Abdul Aziz.

Powertium Engineering is equally owned by Abdul Aziz and Datuk Anuar Noordin. The two made a name for themselves when they were instrumental in helping grow Weststar Aviation Services Sdn Bhd into a global helicopter service provider. Anuar Noordin is still the chief business development officer of Weststar Aviation, according to its website.

Powertium Marine was initially known as THT-Powertium Marine Sdn Bhd with Lembaga Tabung Haji as a shareholder, but Abdul Aziz and Anuar Noordin bought out the pilgrim fund, resulting in the name change.

According to its website, Powertium Marine operates a fleet of four fast crew boats, and for its financial year ended December 2022, the company suffered an after-tax loss of RM6.43 million on revenue of RM3.74 million.

Powertium Marine had total assets of RM30.58 million and total liabilities of RM42.7 million for the year ended December 2022, while its accumulated losses stood at RM31.57 million.

DS Asset Management is known in the market as Delos, and is headed by Brian Ladin. Delos has been involved in a number of shipping deals, including with Indonesian shipping outfit PT Berlian Laju Tankers, Hamburg-based Koenig & Cie, US company Absolute Nevada LLC and Oslo, Norway-listed Gram Car Carriers, among others.

It is understood that some of the parties approached to buy Orkim were looking at less than half the asking price, resulting in talks falling through. 

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