AsiaBio to diversify into O&G transportation industry

Kuala Lumpur: Asia Bioenergy Technologies Bhd (AsiaBio) is seeking to venture into the oil and gas (O&G) transportation industry through the proposed acquisition of two shipping companies for downstream activities.The company is an investment holdings company that operates as a technology incubator, particularly in the bioenergy sector.

AsiaBio Tuesday entered into a Heads of Agreement (HOA) with Hoe Leong Corporation Ltd (HLCL) from Singapore and Reachmont Logistics Sdn Bhd (RLSB) to facilitate the acquisition of Semua Shipping Sdn Bhd (SSSB) and Semado Maritime Sdn Bhd (SMSB).

Speaking to reporters after the signing ceremony, AsiaBio's Non-Independent Executive Director Steve Tan Sik Eek said the HOA would provide an avenue to expand into downstream O&G activities. – Bernama

The HOA indicates that the definitive agreement for the transaction is subject to regulatory approvals and has an exclusivity period of three months.

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Tan said through the HOA, the shares in SSSB and SMSB will be transferred to a Special Purpose Vehicle (SPV) collectively held by HLCL, Ebony Ritz Sdn Bhd and RLSB, and would eventually be acquired by AsiaBio via shares swap worth around RM168 million.

This will in turn make the SPV a 25 per cent stakeholder in AsiaBio.

He said the SPV would provide a profit after tax (PAT) guarantee of RM8 million for the financial year ended Dec 31, 2014 and is expected to contribute RM14 million for financial ended 2015.

For any profit shortfall in 2015, shareholders would have to pay AsiaBio an amount proportionate to their existing stake holding, he added.

Tan said with the diversification, he expects the balance sheet of Asia Bio to improve and the move is part of its long term investment strategy.

AsiaBio registered a widened cumulative loss for the first nine months of financial year 2014 at RM1.28 million from the RM710,000 recorded in the financial year ended Jan 31, 2013.

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"When we were involved in renewable energy and incubation companies, there was a lack of immediate returns for shareholders. They can now expect a more immediate return and also capitalise on the SPV's growth potential," said Tan.

He was also of the view that the proposed acquisition is poised to benefit from falling oil prices as it constitutes 30 per cent of transportation costs. – Bernama

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