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M&G BERHAD - 5078 is a listed company dealing in energy services by providing OSV (AHTS, SSV) and Oil Tanker logistic services. Formerly known as SILK HOLDINGS BERHAD, the company went through a series of restructuring including the disposal of Silk Highway, capital repayment and with the most recent being a debt restructuring process in 2020.
The covid19 pandemic had clawed the economy down, reduce a lot of capex into the energy sector for the past 2 years. However, as we are looking at a return to the normalization of the economy, and with the controlled oil production in the OPEC+ organization, global oil price is looking to push towards USD 100 per barrel for the WTI crude.
Currently, the WTI crude price had broken above the resistant line and the bull run is looking to see WTI touching USD 100 per barrel.
With the oil price outlook looking steady, is the current price of M&G a worthy bet for a position in the coming oil and gas theme play?
M&G had 3 division
1. JASA MERIN (MALAYSIA) SDN BHD - 21 OSV vessel, comprises of 19 AHTS and 2 SSV
2. JASA MERIN (LABUAN) PLC - 7 Oil Tanker (Chemical tanker, Clean petroleum product)
3. JASA MERIN SHIP MANAGEMENT - For repair, maintenance or ship vessel.
Due to the impact of Covid19, the utilization rate for the vessel had dropped as oil price plunge. However, the oil price had since recovered and is now sitting at 5 years high.
At the surface outlook, you would think that M&G is a failed company as share price trade below 10, but what are the silver lining to make this company a potential gem to be polished.
1. Shareholder ownership
One of the major shareholder is executive chairman - Dato Mohammed Azlan bin Hashim. With 23.55% stake, Dato Mohammed Azlan bin Hashim is also sit in the board of director in Khazanah Malaysia. Other listed company directorship is IHH, Telekom Malaysia, and D&O GREENTECH Berhad.
2. Strategic ties with TERENGGANU STATE GOVERNMENT
JASA MERIN (MALAYSIA) SDN BHD is 70% owned by M&G berhad and 30% by TERENGGANU STATE GOVERNMENT. TERENGGANU is a state rich with oil and gas production at it's coastal area. The strategic ownership will be advantage for getting provision for OSV at PAC production operation which will benefit the group.
3. Energy supply crunch
China coal mine supply disruption due to flooding had turn energy demand into other resources such as LNG and Crude Oil. Upcoming winter season will also boost oil demand due to demand from heating.
Private placement for the way ahead?
M&G current outlook is good with oil price recovery and coming more demand for oil tanker chartering as oil production increases. However, it's current long term debt might be a question mark for investor.
Due to better prospect ahead, it is possible for M&G to undertake a private placement to pare down debt and for working capital.
If M&G is looking to raise RM 15 to 20 million from 10% private placement, the placement share would be looking to priced around 20 cents range
10% private placement from existing share base of 723m
72.3 million shares x 20 cents = RM 14.4 million
Hence at the current price, will M&G be a worthy bet ???
IMPORTANT NOTICE
Please be informed, I am not a professional or certified analyst. I am not a licensed consultant, just a normal retail investor. I am just sharing my ideas and opinion on the market outlook. Any company mentioned should not be interpreted as a buy/sell/trade call. Please do your own research and buy/sell/trade at your own risk.
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