KUALA LUMPUR (Dec 5): Oilfield services company Deleum Bhd (KL:DELEUM) said it is exploring more acquisition opportunities, after firming up a 70% stake purchase in an Indonesian valve solutions provider that could triple its addressable control and pressure relief valve market size.
The ambition is to go beyond Malaysia and Indonesia, said Deleum group chief executive officer Ramanrao Abdullah, who noted that the natural development would be to look at Thailand and Vietnam for its next acquisition.
The group on Thursday signed an agreement to acquire a 70% stake in PT OSA Industries Indonesia from OSA Industries Pte Ltd for US$7 million (RM31.3 million), expanding Deleum’s regional footprint in the oil and gas (O&G) valve business.
“We are looking at many opportunities, but you’ve got to make sure that at the same time not bite more than you can chew, so we’re mindful of that,” said Rao, as he is known, at a press conference after the signing.
However, Rao stayed mum when asked whether Deleum is currently in talks for future acquisitions. Deleum’s net cash stood at RM85.41 million as at end-September.
In Indonesia, PT OSA is the sole channel partner for Baker Hughes valves, complementing Deleum’s 51%-owned subsidiary Penaga Dresser Sdn Bhd, the sole channel partner of the same for Malaysia.
Penaga Dresser CEO Azman Jemaat noted that Penaga Dresser is currently twice the size of PT OSA, but that in terms of control and pressure relief valve market size on an operating expenditure basis, Indonesia is larger at US$52 million (RM230.41 million) versus Malaysia’s US$25 million (RM110.78 million).
Deleum has a 36% market share for control valves in Malaysia, and 22% for pressure relief, versus PT OSA’s 11% for the control valves market in Indonesia and 5% for pressure relief valves, according to Azman.
“If we just look at the numbers standpoint, there are opportunities for growth. If we were to use our current market share in Malaysia as a benchmark, that could be achieved [for PT OSA in Indonesia] within maybe the next five years,” Azman said.
Attached to the deal is PT OSA’s profit guarantee of US$2.7 million (RM12.1 million) across financial years ending Dec 31, 2024 (FY2024) and FY2025.
PT OSA posted a net profit of RM2.7 million for FY2023, RM3.04 million for FY2022 and RM3.5 million for FY2021. Revenue stood at RM33.55 million for FY2023, RM28.38 million for FY2022 and RM23.2 million for FY2021.
The US$7 million purchase consideration for OSA Industries’ 70% stake in PT OSA is to be funded via internally generated funds and bank borrowings.
The transaction follows the heads of agreement signed between Deleum's unit with five parties, including PT OSA and its shareholders, in March this year to undertake due diligence.
“Our expanded team and established presence across the two countries present the invaluable opportunity not only to tap into the dynamic valves market in Southeast Asia, but also extend our coverage beyond existing product lines,” Rao said.
“The ongoing and planned investments in oil and gas infrastructure, coupled with increased energy demands on the back of accelerating economies, augur well for the prospects of the valve sector in the region.
“I am certain that the coming together of two leadership teams in the respective countries is a potent combination that would be a positive catalyst for all, in the years to come,” he added.
OSA Industries, which is selling the 70% stake in PT OSA to Deleum, is 99.9% owned by PT OSA founder and director Ong Siow Aik and 0.01% by Lorinne Kon. The remaining 30% stake in PT OSA is owned by Erik Aristano.
The acquisition is expected to be completed by the first half of 2025.
At the noon break, Deleum shares stood unchanged at RM1.39, valuing the group at RM558.16 million. The counter is up 45% this year.