A Look At Vastalux Energy

One of the stocks that got hit big time (this morning) is Vastalux Energy.

Vastalux is a rather 'new' stock. It was listed just last year.

On the Edge Financial Daily, August 2008. (broken link)

• 11-08-2008: Second Board-bound Vastalux unfazed by sluggish market
  By Tony C H Goh
  
  KUALA LUMPUR: Despite the current lacklustre market, oil and gas services provider Vastalux Energy Bhd is confident it will receive a good response to its impending initial public offering (IPO) on the Second Board of Bursa Malaysia.
  
  Vastalux’s executive director Azman Ghafar said the oil and gas services sector still offered great potential and the company’s strong track record of continuous growth promised good returns for investors.
  
  “Investors can expect good growth and potentially high capital gains from us. Most oil and gas services stocks are trading at an average of 13 to 14 times of earnings, and could go up to 17 to 18 times if and when the market condition recovers,” he told The Edge Financial Daily in an interview.
  
  Vastalux is targeting a listing by the end of next month. The IPO involves the issuance of 57.23 million new shares and an offer for sale of 26 million shares and a restricted offer of seven million shares.
  
  Its main customers include Petronas Carigali Sdn Bhd, Murphy Sarawak Oil Company Ltd and Malaysian Refining Company Sdn Bhd.
  
  Azman said offshore hook-up commissioning and topside maintenance services was expected to grow by 8% to 10% and was confident its growth would exceed the industry average based on the company’s annual revenue growth rate of 42.7% in the past five years.
  
  “In terms of revenue, we are ranked ninth out of 20 players (in Malaysia),” he said. Vastalux posted a revenue of RM143.23 million for its financial year ended Dec 31, 2007.
  
  Azman said its competitive advantages lay with its strong in-house engineering skills, ownership of three fabrication yards and a marine vessel, and experienced workers.
  
  Founded in 1995 by its executive vice-chairman Mohamad Nor Abdul Rashid and managing director and chief executive officer Nor Sabri Hamzah, Vastalux plans to raise up to RM52 million, including a rights issue in the IPO.
  
  The company plans to spend around RM6.5 million to construct a new onshore fabrication yard in Tanjung Kalong, Terengganu. It is also eyeing two more offshore support vessels. It will also use the proceeds to repay loans and for working capital.
  
  Its secured order book stands at RM900 million (with 40% completed) that will last for another two years. Vastalux is also bidding for contracts totalling RM775 million, including three oil and gas plant work and maintenance projects worth RM103 million from Malaysian Refining Company.
  
  On the ownership of vessels as a competitive advantage, he said: “Owning our own vessels is important, as this could save us the hassle of chartering from others to support our offshore operations and allow us to increase revenue by chartering to other operators when the vessels are not in use.
  
  Meanwhile, Nor Sabri said that Vastalux has not been affected by the shortage of skilled manpower currently plaguing the industry as its continuous flow of jobs enabled the retention of experienced and skilled labour. The company employs 580 people, including 350 offshore contract staff.

A stock in the hot oil and gas sector getting hammered???

23rd Aug 2008. Vastalux eyes RM210m O&G jobs

• ....Vastalux’s core activities include offshore and onshore hook-up and commissioning services, maintenance services for offshore topside and onshore facilities, onshore construction of oil and gas plants, minor fabrications, offshore underwater services and charter of marine vessels.
  
  In the past five years, the company recorded an average annual revenue growth of 42.7%.

42.7% growth? Ah.. but it's annual revenue growth and not profit growth.

Market wasn't hot last year. ( Rather an understatement :P )

• Vastalux Energy offer undersubscribed
  
  Published: 2008/09/03
  
  VASTALUX Energy Bhd's issue of 12 million new ordinary shares has been undersubscribed, MIDF Consultancy and Corporate Services Sdn Bhd (MIDFCCS) said.
  
  A total of 580 applications for 712,300 shares with a value of RM534,225 were received from the public, representing an overall subscription rate of 5.93 per cent, MIDFCCS said in a statement released yesterday in Kuala Lumpur.
  
  For the Bumiputera portion, 211 applications for 273,600 shares were received, a subscription rate of 7.6 per cent.
  
  It said the unsubscribed ordinary shares will be taken up by the underwriters.
  
  Notices of allotment for these shares will be mailed to applicants on or before September 11. - Bernama

Sep 2008: Vastalux Energy given until March for public shareholders

• PETALING JAYA: Vastalux Energy Bhd, whose public offer was undersubscribed, has been given until March 11 to comply with the number of public shareholders under Bursa Malaysia’s listing requirements.
  
  The company is scheduled to list on the second board today.
  
  Yesterday, Vastalux said it had complied with the public shareholding spread requirement in terms of percentage, whereby 25.1% of its total listed shares would be in the hands of public.
  
  However, it had only 698 public shareholders holding no less than 100 shares each. The minimum requirement was 1,000 public shareholders....

Not surprisingly, Vastalux slips 30% on market debut

• KUALA LUMPUR: Vastalux Energy Bhd dipped below its initial public offer price (IPO) of 75 sen on its debut on the Bursa Malaysia second board yesterday.
  
  Its share price hit 58 sen at the opening bell with 900 shares transacted and closed at 52.5 sen, down 22.5 sen or 30%.The total volume of the day stood at 5.5 million shares.
  
  Executive director Azman Abd Ghafar said the opening price was expected due to the soft equity market.
  
  “We are confident that our value would be reflected after the market recovers and supported by the company’s good fundamentals,” he said after the listing ceremony...

10 Nov 2008: Vastalux slips on falling crude oil prices

• ....He added that the company’s share price would recover, supported by it’s good fundamentals.
  
  Now, investors might be asking what he meant by “good fundamentals”.
  
  Azman told StarBiz in an interview the company was in constant discussion with its merchant bank regarding its public share spread.
  
  “We hope that news announcements on the projects we have been awarded since September and the future plans coming to fruition over the next few months would attract interest to the company,” he added.
  
  Projects coming in amidst downturn
  
  Azman said the company has been awarded two projects since its listing.
  
  First, was a RM2.1mil project awarded a week after its listing by Lynas Malaysia Sdn Bhd, the local subsidiary of Australian mineral exploration and chemical processing company Lynas Corp Ltd.
  
  In mid-October, it was awarded a RM32.5mil project by Petronas Dagangan Bhd for the construction of a LPG filling plant in Pasir Gudang, Johor.
  
  Recently it signed a memorandum of understanding with PT Rekayasa Industri, to cooperate in tendering for LPG terminal and filling station projects worth US$10mil under Indonesia’s national oil and gas firm, PT Pertamina.
  
  “What we want to tell the market is that we have not been idle since listing and we have been working on winning more projects,” Azman said.
  
  The company’s order book is now worth over RM1bil and would last till 2010.
  
  But the newly listed company faces a number of challenges, not the least of which is the price of crude. This has steadily dropped since mid-September when the global financial meltdown took a turn for the worst.
  
  Goldman Sachs Group Inc, which had raised the possibility that crude could reach US$200 by year-end, now believe that it might drop further to US$50 in the event of a global recession.
  
  Recurring income
  
  Would a recession mean lower demand growth for the ancillary services that oil and gas outfits such as Vastalux have to offer?
  
  Producers might reduce spending on field development if low prices enviroment persists while the credit crunch and tighter lending rules might place constrains on the ability of companies to invest.
  
  To ride out any downturn in the industry, Azman said the company was diversifying its clientele and going into steel hatch cover fabrication, which shares the same technology platform as its existing minor fabrication business.
  
  The company is in a joint venture with Alpha Company Ltd, its Vietnamese partner, to supply MacGregor Oy, a firm located in Kaarina, Finland, with steel hatch covers on a 10-year contract. MacGregor is an engineering and service solution provider to the maritime transportation and offshore industries. The yard facility would be ready next July.
  
  “Our joint venture with Alpha Company Ltd in Vietnam to supply MacGregor Oy will bring in at least US$8mil a year in recurring income for the next 10 years when fully operational,” Azman said.
  
  For the financial year ending December 31, 2009, he estimates that the MacGregor contract will account for almost half of the the company’s projected RM240mil revenue .
  
  “Ideally we are looking at between 40% and 50% of our revenue to be recurring income in the coming years,” Azman said.
  
  He pointed out that the company and Alpha plans to jointly explore other business ventures in the oil and gas services industry in Vietnam.
  
  It is also in talks with another company to tender for projects under Saudi Aramco in the Middle East.
  
  On concerns that oil companies would cut down on their exploration, production and refining activities, Azman said the players usually work on five-year timelines and would continue with the work planned at the time when the price of crude oil was high.

June 2009.

• ... Vastalux bids for RM771m projects
  
  By Kamarul Yunus Published: 2009/06/16
  
  VASTALUX Energy Bhd (7251), an integrated oil and gas supporting services provider, is bidding for some RM770.5 million worth of contracts, including jobs valued at RM70.5 million in Indonesia this year.
  
  
  
  Its executive director Azman Abd Ghafar said the company is confident of securing 30 per cent, or RM210 million, of the bids, mostly for local jobs, with the first results of these tenders expected to be known within this month.
  
  "Currently, our order book stands at RM950 million, of which 55 per cent, or RM522.1 million, of those contracts had been completed as at the end of December last year.
  
  "We are in the midst of executing the remaining 45 per cent or RM427.9 million worth of contracts that will last until next year or some may spill into 2011.
  
  "These contracts do not include some RM50 million projects that we secured in the first quarter ended March 31," he told reporters and analysts at a briefing after the company's annual general meeting in Kuala Lumpur yesterday.
  
  Of the new projects it is bidding for, Azman said, hook-up and commissioning and maintenance constitute about 44.6 per cent, and the remaining are for plant construction and maintenance.
  
  He said Vastalux is also expanding its operations in Saudi Arabia, Vietnam and Indonesia.
  
  A joint-venture company will be set up in Saudi Arabia later this year, which will then bid for projects worth between US$50 million and US$100 million (RM176 million and RM352 million). In Vietnam, Vastalux Energy has acquired land for US$3.6 million (RM12.6 million) at Ben Tre province to build a plant producing hatch covers for vessels.
  
  "The estimated development cost in the area is about US$12 million (RM42.2 million). We paid US$2 million (RM7 million) for the land last year, and the remaining US$1.6 million (RM5.6 million) is expected to be paid by the third quarter of this year.
  
  "Construction of the plant is expected to commence in the fourth quarter 2009, and the whole project is expected to be completed by the third quarter of next year," he said.
  
  On the local front, Azman said, the company has acquired a piece of land to be converted into a fabrication yard in Telok Kalong, Terengganu. The development, costing about RM12 million over four phases, will increase the group's yard capacity by 1,500 tonnes per annum.
  
  At present, Vastalux Energy operates and manages fabrication yards in Kemaman, Labuan and Bintulu.
  
  Azman said the company hopes to sustain or even improve last year's financial performance, given the positive outlook of the oil and gas industry, particularly in Malaysia, and continued demand for the commodity.
  
  The group recorded a turnover of RM186.8 million and a net profit of RM17.6 million last year, 10 per cent and 8 per cent respectively more than expected.

11th August 2009, first warning sign came, Vastalux subsidiary served winding-up petition

• KUALA LUMPUR: VASTALUX ENERGY BHD [ VASTALX 0.530 -0.005 (-0.935%)] announced that its major subsidiary Vastalux Sdn Bhd (VSB) has been served a winding-up petition by Principal Gas Sdn Bhd due to outstanding invoices payable to the petitioner for goods sold and delivered.
  
  In a statement to Bursa Malaysia yesterday, Vastalux said the the winding-up petition dated June 23, 2009 was served on VSB on Aug 6, 2009 and would be heard at the Kuala Lumpur High Court on Sept 17, 2009.
  
  It said the amount claimed by Principal Gas against VSB was RM5.61 million, which is the principal amount with no interest.
  
  Vastalux said it will take immediate steps to file an application to oppose the petition and strike off the petition.
  
  “The company is taking steps to settle the matter before the hearing of the winding-up petition on Sept 17, 2009,” it said, adding its directors did not foresee any impact of settlement on the group, financially or operationally.
  
  It also said the group was not expected to incur any further losses as the amounts claimed had been provided for in the accounts.

28th Aug 2009: Quarterly rpt on consolidated results for the financial period ended 30/6/2009. It lost some 1.653 million! Less than one year after being listed, Vastalux reported losses!

Last night, Vastalux reported its earnings. It had some 17.727 million in losses!

Yeah, the stock is crashing down today for a good reason!

And in its books, its trade receivables were massive.

Amount due from customers = 163.052 million!!!!!

What is happening? Compared to its quarterly revenue and earnings (see earnings snapshot from DJ below), why is the receivables so high?



And this is what the company had to say in its notes.

How?

Company was just listed in Sept 2008 and now it runs into all kinds of trouble.