Deleum Bhd ... July 2008

The firm plans to acquire stakes in more independent power producers (IPPs) and grow its power-plant construction order book across Asia to expand the company’s earnings base.

This comes on top of its bread-and-butter oil and gas unit which supplies and services equipment like gas turbines and wellheads, capitalising on soaring prices of crude oil that is prompting more oil and gas production.

The company was targeting emerging regional power markets like Cambodia and Indonesia. It intends to invest in smaller power plants with estimated output of 50 megawatts (MW), and secure more engineering, procurement, construction and commissioning (EPCC) contracts.

*** Deleum, listed on Bursa Malaysia’s Main Board in June 2007, is not new to the power-generation business. In 1995, the firm acquired a stake in IPP Cambodia Utilities Pte Ltd, which supplies 35MW of electricity to the capital Phnom Penh,

In Malaysia, Deleum was the EPCC contractor for a 9.6MW co-generation power plant, which was commissioned in 2007, for Muda Paper Mills in Kajang ***

The IPP stakes generate recurrent income to safeguard earnings against business volatility. Deleum’s ablility to clinch more projects and expand its new businesses is crucial for its sustainability.

The construction of new platforms, maintenance works and increased drilling activities will drive Deleum’s earnings. Deleum is one of the leading contenders for the supply of turbines and related parts for the Sabah-Sarawak Onshore Gas Transmission pipelines.

Deleum has the ability to gear up, as it currently sits on a cash pile of RM38 million as at March 2007, which translates into cash of 48 sen per share. For now, Deleum’s oil and gas unit already has some RM1 billion worth of jobs in hand, and it is bidding for about RM300 milion worth of contracts to boost its order book.

The company imports oil and gas industry equipment from manufacturers like Solar Turbines Inc and provides maintenance services. However, a foray into manufacturing of oil and gas equipment is already on the cards. Deleum planned to collaborate with its foreign equipment makers to set up production facilities in Malaysia.

In September 2007 it planned to acquire a 51% stake in Penaga Dresser Sdn Bhd (PDSB) for RM7.25 million. PDSB, 49%-owned by engineering products entity Dresser Italia, supplies valves and flow regulators for the oil and gas industry. The partnership with Dresser Italia will also open up opportunities for the group to venture into local manufacturing activities in the future.

Financial Results:
For the first quarter ended March 31, 2008, Deleum’s net profit rose 3.5% to RM5.88 million from RM5.68 million a year earlier, although revenue fell 30.2% to RM83.6 million from RM119.84 million. The lower revenue was mainly due to lower billings for specialised equipment and services.