MARC has assigned a AA- rating to Scomi Group Bhd’s (Scomi) proposed issuance of RM500 million Medium Term Notes (Notes). The rating reflects the group’s good competitive position as the group has one of the most comprehensive range of products and services for the provision of integrated fluids solutions in the world; its regional presence in 34 countries following the acquisition of KMC Oiltools Bermuda Ltd (KMC Oiltools) in July 2004; improving regional profile upon the acquisition of Chuan Hup Holdings Limited’s (CH) entire marine logistics business and offshore support services (via Habib Corporation Berhad or “Habib”). Moderating the rating, however, is the volatility in the oil and gas industry affected by the oil gas supply/demand condition, existing prices and price expectations among the oil and gas operators. However, against the backdrop of high oil prices and new findings of oil fields, offshore activities have revitalized and are expected to surge in the next five years.

Through its subsidiaries, the Scomi group is involved in an array of services, encompassing drilling fluids/drilling waste management, marine vessel transportation services, manufacturing of oilfield equipment, oilfield products distribution and offshore support services. Followings its acquisition of KMC Oiltools, Scomi group has one of the most comprehensive product and services range for the provision of drilling fluids and drilling waste management in the world. For offshore support services, Scomi (via its interest in Habib) shall have access to a fleet of 156 vessels upon acquisition of CH’s assets by Habib.
Going forward, the DF/DWM division is expected to be the primary revenue driver, contributing more than 90% to the group’s revenue on the back of increasing drilling activities, mounting environmental concerns and stricter government policies on waste discharge worldwide. Scomi is targeting a global market share of 20% by year 2009 through the existing established relationship between KMC Oiltools and the national/independent oil companies. Going forward, Scomi’s cashflow protection measures are commendable given the strong operating cashflows, mainly contributed by the sales of DF and DWM products and services.

The investment in CH’s assets (via Habib) will create opportunities for Scomi to expand marine vessel transportation of bulk aggregates and offshore support services in the oil & gas industry. Furthermore, this deal is expected to propel the Marine Transportation business as a major regional marine transportation and offshore support service company focusing on the oil and gas industry and is expected to contribute positively to Scomi’s future performance.

Its financial flexibility stems from its relationship with the local as well as foreign financial institutions by virtue of its subsidiaries’ global presence, a cash coffer of over RM90 million after netting off the overdrafts as at 31 March 2005 and unutilised banking facilities of close to RM50 million as at April 2005.