KUCHING: Integrated facilities management service provider, GFM Services Bhd (GFM) and its subsidiary companies has announced the proposed acquisition of approximately 49 per cent stake in a downstream oil and gas (O&G) player, Highbase Strategic Sdn Bhd (HSSB).
Founded in 2003, HSSB is principally involved in the provision of engineering services for the O&G industry, including cleaning, repair and maintenance services of storage tanks, pressure vessels and heat exchangers in Malaysia, among others.
It has a track record of serving major clients in the O&G sector and has an estimated outstanding project value from financial year ending December 31, 2020 (FY20) to FY24 amounted to RM261.4 million.
According to GFM managing director Ruslan Nordin, “This marks an exciting milestone for GFM as we establish a footprint in the O&G maintenance services space. This acquisition enlarges our scope of works and competencies and gives us access to a new customer segment; the O&G sector.
“We believe it is an opportune time to enter the O&G industry as optimism and activities for service providers are expected to pick up.”
HSSB’s 51 per cent-owned joint venture with Singapore-based O&G integrated solutions provider, Mun Siong Engineering Ltd, which is listed on the Main Board of the Singapore Exchange, is one of the five players who has secured the Integrated Turnaround Main Mechanical and Maintenance Mechanical Static (TA4MS) contract to provide plant turnaround services for the Pengerang Integrated Complex (PIC) in Johor from Petroliam Nasional Berhad (Petronas).
With an estimated project value of RM247.5 million, the contract is for a period of five years with an option to extend by Petronas.
Ruslan added, “The O&G sector is not entirely new to us as we had previously secured a 3-year contract worth RM65 million from January 2016 up till March 2019 to provide workers camp management services during the construction period of a steam cracker plant in PIC, Johor. Ever since then, we had set our sights on exploring business opportunities in the area.”
“Our investment in HSSB allows us to strategically position GFM to capture arising opportunities in the O&G downstream sector. Demand for O&G plant turnaround is expected to be positive as plant turnarounds are scheduled periodically and is part of legislation compliance.
“Also, it is not directly affected by the volatility in oil prices. With the secured contract of providing plant turnaround services for PIC in Johor, this gives us the credibility to bid for similar type of projects in other areas.”
Under the proposed acquisition, GFM will subscribe for 2,882,352 new HSSB shares, representing approximately 49 per cent stake in HSSB for RM1. In addition, GFM has proposed to subscribe for a minimum of 15 million and up to 20 million redeemable convertible preference shares (RCPS) in HSSB for RM15 million and up to RM20 million, based on the issue price of RM1 per RCPS.
The proposed RCPS subscription is expected to be funded by a combination of GFM’s internally generated funds, equity financing and/or borrowings. The proceeds from this shall be utilised for working capital and capital expenditure for HSSB’s project in PIC, Johor, as well as to partially settle debts owed by HSSB to its trade creditors, bankers and statutory institutions.
This fund-raising exercise is aimed at enhancing HSSB’s balance sheet and provide it greater financial flexibility to perform its services in an efficient and timely manner while pursuing further growth prospects in the market. Meanwhile, GFM will receive a fixed dividend rate of six per cent per annum from the RCPS.