Hoe Leong completes $15min acquisition of Malaysia's tanker company

Addition of Semua Group to be the springboard for future expansion in vessel chartering business.

Mainboard-listed Hoe Leong Corporation Ltd (“Hoe Leong”), through its 80%-owned joint-venture with Auspicious Journey Sdn Bhd, a wholly-owned subsidiary of Malaysia-based Grand Columbia Holdings Sdn Bhd, on Thursday completed its RM35.3 million ($15.1 million) acquisition of a 49% stake in Malaysia based Semua Group, an owner-manager of oil and chemical tankers. The Semua Group, thus valued at RM90 million, comprises several companies which are part of Bursa-listed Sumatec Resources Bhd (“Sumatec”).

With the completion of the transaction, Hoe Leong now effectively holds 39.2% of the Semua Group. With the net tangible asset value of Semua Group at RM126.5 million as at 31 December 2009, the consideration payable by the Company implies a price-to-book ratio of 0.71x. In addition, as part of the acquisition, Sumatec has provided a financial representation that the audited consolidated profit after taxation for the Semua Group shall be no less than RM25 million and RM31 million for FY10 and FY11 respectively, according to a Hoe Leong report.

Commenting on the acquisition, Mr James Kuah, Chairman and CEO of Hoe Leong said, “Our earlier venture into the vessel chartering business has yielded strong positive returns, and I believe the Semua acquisition will do the same. Furthermore, our enlarged fleet following this acquisition will serve as a springboard for future expansion in this business.”

Backed by a 20-year track record, and long-standing relationships in the tanker industry, Semua currently operates 12 oil and chemical tankers, which are all gainfully chartered out to blue chip clients on contract periods of up to 10 years.

The 12 vessels will boost Hoe Leong’s operating fleet to 14, complementing a specially retrofitted drilling mud processing barge and an offshore supply vessel, which Hoe Leong acquired in 2008 and 2009 respectively.
On the Company’s plans going forward, Mr Kuah said that Hoe Leong is actively seeking growth opportunities in the offshore oil and gas support industry.

“The timing is right for us. This is an industry where growth will be sustained by the world’s continued demand for energy. With Semua on board, we will be able to leverage on a highly experienced vessel management team to serve the oil and gas exploration and production segment where the returns are generally higher,” he said.