KUCHING: Ocean Vantage Engineering Sdn Bhd (OVE) will subscribe for 700,000 ordinary shares in Esprat Sdn Bhd for RM1 million in cash to diversify its business.
The wholly-owned subsidiary of Ocean Vantage Holdings Bhd (OVH) has entered into a subscription agreement for the 700,000 shares representing 70 per cent of Esprat’s enlarged total number of issued shares.
The proposed subscription will be funded through internally generated funds of OVE, OVH said in a filing with Bursa Malaysia.
Kuala Lumpur-based Esprat is principally engaged in provision of specialised training and rental of equipment. The company is a multi-disciplined service provider to the petrochemical, energy, marine and civil industries, supply industrial rope access services and training, non-destructive testing inspection and pressurised habitat to numerous clients in Malaysia and internationally.
OVE’s core businesses are in provision of onshore and offshore project management and engineering, procurement, construction and commissioning (EPCC), supply of manpower, materials, tools and equipment and drilling rig charter services.
OVH said the subscription price was arrived at between both parties on a willing buyer-willing seller basis after taking into consideration inter alia the audited net asset (NA) of Esprat of RM1.77 million as at May 31, 2021, and the future earnings potential of Esprat after taking into consideration the future prospects of the oil and gas industry and Esprat.
The proposed subscription is expected to be completed by second half year of 2022.Upon completion of the subscription, Esprat will become a 70 per cent-owned indirect subsidiary of OVH.
“The proposed subscription will enable OVE to diversify and tap into the market of pressurised habitat which are specially constructed portable, customised structures specifically designed to facilitate hotwork in hazardous zone 1 & 2.
“The proposed subscription is further expected to complement OVE’s project management business as it allows OVE to extend and provide habitat services to its current client base. The proposed subscription will also allow OVH group to have an indirect access to the on-going and future projects of Esprat.
“Synergistic benefits are expected to arise from the proposed subscription as both OVE and Esprat are servicing the same industry. Furthermore, the proposed subscription will add to the skillset of the OVH group especially in the both upstream and downstream project related opportunities while also allowing both OVE and Esprat to diversify their customer base by including the other’s customers which is expected to benefit both parties in the long run,” said OVH.
In financial year ended 31, 2019 (FYE2019), Esprat incurred loss after tax of RM254,031 on revenue of RM1.07 million and the losses widened to RM852,891 (revenue of 2.54 million) in FYE2020 and 2.03 million (RM2.17 million) in FYE2021. In financial period ended December 2021, Esprat returned to the black with after-tax profit of RM213,415 on revenue of RM2.29 million (unaudited).
According to OVH, Esprat had suffered losses in FYE2019, FYE2020 and FYE2021 due to higher operating costs and a decline in oil and gas activities due to the COVID-19 pandemic.
“Provision of doubtful debts to clients that were badly affected by the pandemic and cancellation of work orders during the same period further affected Esprat business.”
On the prospects of Esprat, OVH said: “Esprat pressurised habitat system is well received by local operators in Malaysia which are used both onshore and offshore. OVH’s acquisition of Esprat will strengthen OVE’s internal capabilities in offering wider range of products and services to complement its EPCC segment while allowing Esprat to capitalise on OVE’s management experience, existing resources and networking to expand its business.
“According to the Petronas Activity Outlook (PAO), 2021-2023 remain positive with continued work on various maintenance to be performed in both upstream and downstream, on-going and future demand by major contractors for projects related to offshore fabrication, offshore installation, hook-up and commissioning, offshore maintenance, construction and modifications and plant turnarounds are seen to contribute positively to OVH group future earnings.”
