KUCHING: TAS Offshore Bhd’s (TAS Offshore) move to enter into a joint venture (JV) with China partner Chan Baihang to fund its build to stock (BTS) operations was lauded as a positive step towards further opportunities within the O&G industry.
Reflective of this optimism was an increase in TAS Offshore’s share price yesterday, rising to a high of RM1.16 during trade yesterday from an opening price at RM1.07.
The counter closed at RM1.12. To note, TAS Offshore’s wholly-owned subsidiary, TA Ventures (L) Ltd, entered into the said contract with Chan.
The estimated total cost of the JV is about RM120 million, of which Chan will contribute 40 per cent of the financial investment, while TAS will contribute the remaining 60 per cent.
Chan Baihang is a businessman from Guangdong who owns transportation companies, a construction firm and is also involved in chartering, building and selling OSVs.
As TAS’ build-to-stock (BTS) business model requires intensive investments in capital, RHB Research Institute Sdn Bhd (RHB Research) said the JV would allow the company to achieve this objective while minimising the risks of exposure in this operation.
“As the vibrant oil and gas (O&G) sector requires the speedy supply of OSVs with shorter delivery periods, the BTS model has become increasingly popular in the shipbuilding industry,” the firm explained.
“The company is currently building six more OSVs, which would be ready for sale by next year.”
As at end-May 2014, the company had total net cash and cash equivalent of RM36.5 million and short-term borrowings of RM35.7 million, which implies a marginal net cash of RM0.8 million.
“This is in comparison with its total cash and cash equivalent of RM42.1 million and short-term borrowings of RM18.7 million in end-May 2013, which reflected a net cash pile of RM23.4 million,” added RHB Research.
“As the company boasts of a prudent management team, it is carefully exploring opportunities in the industry – and we believe that its decision to enter into a JV with its China partner is a positive move.”