IPO ... GAS Malaysia

GMSB’s principal activity includes selling marketing and distributing natural gas as well as constructing and operating the natural gas distribution system within Peninsular Malaysia. It has a network of natural gas pipelines connecting customers to the Peninsular Gas Utilisation transmission system owned and operated by PGB. As at July 20, 2011, the GMSB group has a network of gas pipelines which spans an accumulated length of approximately 1,800 kilometres across Peninsular Malaysia.

MMC Corp Bhd and the other shareholders of the profitable Gas Malaysia Sdn Bhd is undertaking a listing exercise which would involve an offer for sale of 26% of Gas Malaysia’s existing stake.

MMC-Shahpadu (Holdings) Sdn Bhd owns 55% or 353.108 million shares of Gas Malaysia, Tokyo Gas-Mitsui &Co (Holdings) Sdn Bhd 25% (160.503 million shares) and PetGas 20% (128.388 million shares).

Gas Malaysia posted net profit of RM298.27 million in the financial year ended Dec 31, 2010 compared with RM243.14 million in FY2009 and RM269.32 million in FY2008. Revenue was RM1.807 billion in FY2010, RM1.753 billion in FY2009 and RM1.879 billion in FY2008.

MMC’s cost of investment of its effective equity interest of 41.80% in Gas Malaysia since May 16, 1992 was RM18.88 million.

The listing exercise would involve the subdivision of one existing Gas Malaysia share of RM1,000 each into 2,000 shares of 50 sen each, increasing the paid-up from 642,000 existing ssares to 1.284 billion shares.

Gas Malaysia would issue to Petroliam Nasional Bhd one special rights redeemable preference share at an issue price of 50 sen. The shareholders comprising of MMC-Shapadu, Tokyo Gas-Mitsui and Petronas Gas would then offer for sale of 333.84 million Gas Malaysia shares or 26% of the paid-up. There would not be any issue of new Gas Malaysia shares.

147.678 million shares or 11.5% would be offered to Bumiputera institutional and selected investors and 155.820 million shares or 12.14% to Malaysian institutional and selected investors.

The institutional price to be paid by the institutional investors pursuant to the institutional offering is to be determined on the price determination date by way of a bookbuilding exercise.

Under the retail offering, the vendors proposed to offer 30.342 million shares (2.36% of the issued and paid-up share capital) of which 25.68 million shares (2%) would be offered to Malaysian citizens, companies, co-operatives, societies and institutions.

On the number of Gas Malaysia shares to be retained by MMC-Shapadu upon completion of the proposed IPO scheme, its interest would be diluted from 41.80% to 30.93%.

MMC Group stands to record a gain on disposal pursuant to the proposed offer for sale after the completion of the proposed IPO scheme but the quantum of gain can only be ascertained once the institutional price and the retail price have been determined.

The proceeds attributable to MMC by way of dividend payout by MMC-Shapadu will be 76.0% of the proceeds to be received by MMC-Shapadu after taking into account the listing expenses to be incurred in respect of the proposed offer for sale and the related portion of the cost of investment. The proceeds received by MMC are proposed to be utilised for repayment of financial commitments and working capital purposes.

The listing would accelerate the growth of the gas supply and distribution business of the GMSB group.

By creating a separate listed entity, it will provide GMSB with greater capital management flexibility and enable GMSB to optimise its capital structure and cost of capital by accessing the equity capital markets.

The listing would also enable it to pare down existing borrowings to further improve its capital structure.

The proceeds raised from the sale will accrue entirely to the offerors in proportion to the number of shares offered.