OIL PRICE BUST-UP WAS BAD FOR US: Eversendai admits mistake, moves on to focus on jobs worth RM1.5bil

KUALA LUMPUR – Having suffered losses from oil and gas (O&G) investments, Eversendai Corp Bhd is seeking to put the past behind it by focusing on new projects worth RM1.53bil secured in the last eight months.

Major shareholder and executive chairman Tan Sri A.K. Nathan said the company had made a mistake in the S$24.69mil (RM74mil) investment in Singapore-based Technics Oil & Gas Ltd in November 2012.

Technics was a victim of the O&G bust that contributed to Eversendai writing off RM101.7mil in impairment costs to-date, which in turn led to a loss of RM71mil for the six months ended June 30.

“It is fully-impaired and written-off, no more hereafter for Technics. We also felt that it was a bad investment. We are going to move forward looking to a brighter future.

“Mistakes happen and it was a painful time for me, but what to do? We can’t undo it but can only work harder to make profits and recover some of the losses,” he told a press conference here.

Technics, which was listed in Singapore in April 2003. It is a full-service integrator of compression systems and process modules for O&G firms.

Singapore’s Business Times reported last month that Technics was facing two legal claims of close to S$5mil for loan repayments, on top of an earlier claim by its landlord seeking unpaid rent and other late payment charges. It had been placed under judicial management after experiencing the financial troubles.

Eversendai had diversified into the O&G sector in 2012 as part of its strategy to double revenue to RM2bil by 2017.

In 2014, the company clinched its maiden O&G contract in Malaysia valued at RM72.2mil to supply and install steel structures, as well as to fabricate and erect piping and mechanical equipment, which is Eversendai’s expertise.

But with crude oil having plunged to as low as US$27 per barrel early this year from an average of US$111 per barrel in 2012, new jobs for the overall O&G industry had dwindled. Nevertheless, Nathan is still optimistic.

He was unpurturbed when asked about his company’s stock performance, saying that he was not unduly worried although it had fallen more than 50% for the past year. It closed up 2.5 sen to 45.5 sen yesterday.

“I hardly look at the share price nowadays. Eversendai has its own issues but whatever good news it doesn’t really help with the share price. I just hope the market realises this and people will buy the shares. It is highly-undervalued but that is where the market is,” he said.

Nathan said the last few months have been “very tough” but he expected the company to achieve profits at the end of the year.

Despite the obstacles, the group is not planning to exit the O&G business as it had two O&G outfits that are performing, in addition to the RM11bil worth of tenders for O&G jobs.

Its O&G arm is going downstream with several refinery and petrochemical integrated development project jobs while Eversendai Offshore is busy with a fabrication yard facility with a waterfront project in Ras Al-Khaimah, UAE, where it is currently building two jack-ups/self-propelled lift boats.

In a statement, Eversendai said that as of June 30, it had recorded a strong outstanding order book of RM2.4bil, providing the group with solid earnings visibility in the next two years. It said that in the first eight months of this year, the group’s RM1.53bil worth of projects involved RM649.2mil in the Middle East, RM373.5mil in India and RM504mil in Malaysia and Thailand.

Eversendai had been awarded contracts for the structural design, fabrication and erection of steel structures for the Blue Water Dubai Eye metro station in Dubai; Marathon Futurex II, DLF IT Park Phase III and the Statue of Unity (India); and Lot 91 Kuala Lumpur City Centre. Nathan said Eversendai continued to strengthen its position in the Middle East by securing contracts for a theme park in Abu Dhabi as well as a few other architectural landmark projects with the upcoming Dubai World Expo 2020 and FIFA World Cup Qatar in 2022.

Nathan said Eversendai had tendered for RM20bil worth of contracts. “Of the number, RM9bil is for structural steel and construction projects and RM11bil for O&G jobs,” he says.

Moving forward, he said it would be an exciting time ahead for Eversendai despite the hurdles, adding that he was confident that the group would bag more jobs before year-end. – ANN