A number of local investment banks are in the midst of preparing proposals to secure the mandate to handle the initial public offerings (IPO) of Malaysia Marine and Heavy Engineering Sdn Bhd (MMHE) and Petroliam Nasional Bhd’s (Petronas) petrochemicals business, industry sources said.
It is understood that among those Petronas issued a request for proposal (RFP) are the investment banking arms of CIMB, RHB, Maybank and the AmBank group.
Sources added that the deadline for submitting the proposals is sometime next week and that the banks would be assessed on their broad approach to the IPOs.
A key issue will be the valuation method the banks would be comfortable using in pricing the IPO.
This may range from multiples of profits or of earnings before interest, tax, depreciation and amortisation.
“The track record of the investment bank would also play a factor. So too would be signs of innovativeness in the suggested IPO structures,” said one banker.
It is understood that Petronas and MISC Bhd (the parent of MMHE) have hired an advisor to oversee the RFPs and the selection of investment banks for the IPOs.
Analysts said that MMHE, which reported a net profit of RM284mil in the financial year ended March 31, 2009 (FY09), could fetch an attractive price-earnings multiple of its FY09 earnings, possibly in the high teens.
A valuation of say 17 times its FY09 earnings would give MMHE a total valuation of around RM5bil.
Its performance is driven by three core businesses: engineering and construction services, marine conversion and marine repair.
MMHE runs a yard in Pasir Gudang, Johor, one of the largest in the region and the only one capable of converting big ships into vessels that can process and store oil and gas.
These are known as floating, production storage and offloading units and floating storage offloading units. The yard is also used to fabricate high-tonnage offshore oil and gas structures.
According to OSK Research, MMHE had a huge outstanding order book valued at RM6.4bil as at Dec 31, 2009.
More jobs are expected to come with the oil price stabilising at US$84 per barrel with potential upside. Petronas may also dish out some large-scale projects to MMHE following the former’s success with its partners in winning the rights to develop four oilfields in Iraq late last year.
The proposed listing of MMHE could be considered a “continuation” of its listing intention that did not materialise when the MISC-Ramunia Holdings Bhd reverse takeover (RTO) deal fell through in 2008 due to unsatisfactory due diligence findings.
In the RTO, MMHE was valued at RM3.2bil.
Meanwhile, it is less clear what the IPO structure of Petronas’ petrochemical business will take. Petronas has 19 companies in the petrochemical business, including BASF Petronas Chemicals Sdn Bhd and Optimal Olefins (M) Sdn Bhd.
It is unclear if the IPO would group all of them or just some of the companies.
Petronas’ petrochemical business registered a revenue of RM13bil for the year ended March 31, 2009. Its diverse product portfolio ranges from olefins and polyolefins, fertilisers, industrial to specialty chemicals.
