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Bumi Armada Sailing Again???

Sunday, June 17, 2007

WOW!

What a horrific and disgusting news on a Monday morning.
Bumi Armada set to sail back to Bursa


  • BUMI Armada Bhd may raise funds from an initial public offering in Malaysia as it needs to spend RM1.2 billion to buy 17 ships and service the deepwater oil and gas industry.
    The firm, owned by tycoon T. Ananda Krishnan, may also borrow part of the money needed to finance the two-year initiative.

Yeah, now they need the investing public money again. So they want to seek listing!

A couple of years ago, they delisted their listing, because they felt that there is MUCH MORE money for them if Bumi Armada was privatized!

  • Bumi Armada would complete its circle if it returns to Bursa. Ananda, through Objektif Bersatu Sdn Bhd, had taken the company private in 2002.

See this posting http://everything27.blogspot.com/2006/09/pirates-which-siezed-armada.html

Ms. Claire Barnes of Apollo Investment Management wrote the following (here )

  • To go back to the merits of the shares: in the five years since we first bought Bumi Armada, revenue has tripled. This corresponds to growth of 25% per annum, which is perhaps slightly higher than the growth in other aspects of the business, but broadly reflective. In purely qualitative terms, before thinking about valuation, this is one of the gems of the Malaysian market. It has an excellent service record, it has good relations with its customers in the offshore oil and gas sector, and apart from 1997, when it recorded unrealized FX losses on an appropriately matched loan book, it has sustained returns on equity of comfortably over 20%. It is highly cash generative, and when the Land & General stake was overhanging the market we put forward an MBO-and-buyback proposal which would have seen the debt paid down in short order while generating phenomenal growth in earnings, net assets, and cashflows per share. This opportunity was not taken, but delisting aside, the shares would remain attractive; the offer is far from generous, and clearly includes no premium for privatisation. We didn't sell at RM8.00 two years ago, and Mayban Securities on Friday published a buy recommendation valuing the shares at RM12.20, which is arguably conservative.

    Bumi Armada reported earnings per share of RM1.01 for 2002, with an upbeat assessment of outlook for the year ahead, so is on a current-year PE of 6-7 - perhaps half that of the market
    , despite better-than-average business characteristics and growth prospects, although some discount is normal for illiquidity. In its recent announcement, it has however cut back on operational background, provides no details of major contracts, and omitted any final dividend despite its earnings growth. (This last has particularly incensed some minority shareholders who are surprised 'that Ananda Krishnan should be involved in such a deal'.) This reticence is unfortunate given the conflicts of interest involved.

    In the event of a forced delisting, we believe that there would be a legal case against the directors and the controlling shareholders for oppression of the minorities, but costly and time-consuming legal action is a last resort for investors in any jurisdiction.

    We were pleased to see that Mayban remains optimistic about Bumi Armada's prospects, but admit to being surprised by the timing. Maybank, its parent, was amongst those which originally jumped at the RM7. This must be proof of their Chinese walls - or of the different thought processes of bankers and investors. We are more impressed by this than by the role of RHB Sakura, which also agreed to sell its Bumi Armada shares in August, and wonder whether it was already advising the company or the buyer: as far as we know, the invitation was extended only to Malaysian banks, and not to a single foreign bondholder. Bondholders who expressed a desire to participate immediately after the deal became public were told that it was already too late - which is presumably lawful, but was certainly discriminatory, and not the sort of thing to make foreign investors think they are on a level playing field.

    If an offer is mandatory, it is not necessary to have bureaucrats review the decision. In this case, the controlling shareholders have to pay RM7, but they only have to pay it much later to minorities than to the favoured few. In other cases, it might suit a cash-strapped acquirer very well to avoid a general offer altogether; again, why should officialdom help him? (To avoid any confusion, we would like to be absolutely clear: if a shareholder acquires control, there should be a general offer at the same price, but minority shareholders should be free to refuse.)
    Information flows are important, and much more troublesome than they should be in the era of electronic communications. International investors frequently cannot obtain announcements and circulars through the global custody network in time to consider them adequately; frequently they arrive too late to meet corporate action deadlines. Listed companies should be required to copy the local stock exchange and international wire services with all announcements relevant to investors - such as announcements to Euroclear. This responsibility should not be left to companies: they respond when it suits them, and forget when it doesn't.

So Bumi Armada was highly rated. Growth of over 25% per annum, excellent service record, return of equity of over 20% and great cash flow.

Then out of the blue, Barmada (Bumi Armada), as Claire described "has however cut back on operational background, provides no details of major contracts, and omitted any final dividend despite its earnings growth."

And then it decided to announce to delist with an offer of 7.00! When Mayban conservatively valued it at 12.20.

Me? Honestly, I thought the share should have been worth at least 18.00!

And the rest of was history. Many was simply appalled at the manner Barmada was delisted.

Now let's refer back to Claire's original pirates article which was written back in 2003.
Pirates attempt to seize whole Armada: pitfalls of investing in Malaysia

Read her opening statement again.

  • There are many attractions to living in Malaysia, but we cannot muster the same enthusiasm for investing here (a change from July 99, when we were defending our decision to hold; our major investment then as now was Bumi Armada). Our recent experience has been far from encouraging, and it seems timely to provide an update.

So Bumi Aramada seriously plans to list again, eh?

Well, this is another extremely sad day in the history of stock exchange.

How could foreign investors, like Claire, be enthusiastic about investing in our stocks when our corporates has utter no respect for the minority shareholders?

When there is value in the company, the seek delisting. When they need your money, they seek listing again.

Oh, life is never fair, it has been said.

How true!

However, let me add this, life is never fair if in the future, the investing public shuns our stock market due to stunts like this!

Oh and for Bumi Armada, if it lists, I would AVOID the stock like plague! How could I safely know that I would ever be fully compensated for taking the investment risk in investing their company? What if the pull the same stunt and delist at a cheap valuation again?

Oh, life is never fair!

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