Sime Darby/Ramunia ... Apr 09

Sources say several government linked companies have emerged as interested parties to take up reins at fabricator Ramunia Holdings.

Heading the pack is Sime Darbym which is said to be keen on wrapping up a deal with Ramunia. If all goes as planned, an announcement on the matter may made within the next two weeks.

UMW, one of the interested parties, is however is believed to have scrapped out of the talks and is now said to be looking on subcontract O&G fabrication jobs to Ramunia.

It is uncertain whether Sime Darby’s plan entails coming into Ramunia as a passive shareholder, or if it would involve a change in management of the O&G player.

A source familiar with the deal, says Sime Darby may not necessarily be acquiring shares from Ramunia’s major shareholders LTH or Ramunia Energy & Marine Corp Sdn Bhd. It could involve a share swap with no cash outlay.

LTH, which is Ramunia’s largest shareholder, owns a 29.68% stake in the O&G player while its second largest shareholder, Ramunia Energy holds a 25.68% stake.

This is not the first time that Sime Darby has expressed an interest in coming Ramunia as a shareholder.

Sime Darby’s plan to link up with Ramunia is probably to prepare for additional capacity in capital expenditure by state controlled oil major Petronas. As a result, more yard space is likely to be needed, which in turn would benefit the oil major’s production sharing contractors, one of which is Ramunia.

Ramunia has some flaws, the company trails othr players in terms of management quality and order book strength, which has resulted in three consecutive quarters of bleeding.

It suffered RM279 million in net losses for FY2008 ended Oct 31, 2008 and incurred another RM5.5 million in net losses in 1QFY2009. As of 1QFY2009, the O&G player’s NTA were only 26 sen per share.

With the emergence of a white knight, Ramunia could be given new lease of life, industry observers say.

Without fresh capital injection, Ramunia could become a PN17 candidate – if its losses are not stemmed. Although losses have narrowed in last quarter (1Q2009), substantial cost overruns on its existing order book could throw spanner in the works, erasing shareholders’ funds of Rm148 million.

Given its declining order book, which stands at a mere RM250 million, its frails balance sheet, with an increase in net debt of 20% to RM321 million as well as negative interest cover and operating cash flow.