On Star Biz: Octagon's share price falls sharply
- Published: Monday June 11, 2012 MYT 11:15:00 AM
Octagon's share price falls sharply
KUALA LUMPUR: Octagon Consolidated Bhd's share price fell sharply on Monday after it was declared an affected listed when it defaulted on the credit facility extended by Amanah Raya Capital Sdn Bhd.
At 11.25am, it was down four sen to 4.5 sen. There were 4.79 million shares done.
However, the FBM KLCI was up 9.03 points to 1,579.65. Turnover was 260.99 million shares valued at RM406.51mil. There were 277 gainers, 196 losers and 247 counters unchanged.
Last Friday, Octagon announced had defaulted on the payment and it expected this would have substantial impact on its business, operations and financials of Octagon.
It cautioned the coatings business turnover might be reduced as existing customers could defer new orders.
Other factors were that the material suppliers might request for cash payments for purchases while debtors might likely to prolong the payment of receivables and bankers may recall of existing trade facilities.
Since it has been classified as a Practice Note 17, it had to announce within three months whether the regularisation plan would result in a significant change in its business direction or policy.
I had blogged on this stock before.
- Octagon Series: The Rise
- Octagon Series: A New Octagon
- Octagon Series: Failed Plans And New Plans
- Octagon Series: The Fall
And the other day, this was published on the Edge:
Octagon's revamp may cost KNM sizeable job- Octagon’s revamp may cost KNM sizeable jobWritten by Chong Jin Hun
Friday, 01 June 2012 14:46
KUALA LUMPUR: KNM Group Bhd’s proposed US$222 million (RM706 million) waste-to-energy projects in Sri Lanka awarded by Octagon Consolidated Bhd may encounter obstacles as the latter undergoes a restructuring under Section 176, announced two weeks ago.
This is in anticipation that Octagon will not have adequate funds to finance its projects in Sri Lanka as the company restructures its debt, said analysts. The impact could be substantial for KNM as the RM706 million job accounts for about 20% of the process equipment manufacturer’s RM3.2 billion order book, added the analysts.
“However, we believe KNM could still at least maintain its 1Q results in the coming quarters,” TA Securities Holdings Bhd analyst Kylie Chan told The Edge Financial Daily over the telephone.
Chan said KNM had finalised most of its “kitchen-sinking exercise” which included provisions for doubtful debts and foreseeable losses in 2011. She added that KNM is starting on a “clean slate” for FY12 ending Dec 31.
TA Securities’ RM3.2 billion order book estimates for KNM exclude the £450 million (RM2.2 billion) EnergyPark Peterborough waste-to-energy project in the UK. The project, announced in December 2010, has yet to secure financial closure. Including EnergyPark Peterborough, KNM’s order book comes to RM5.4 billion, while its project tenders amount to RM16 billion, said Chan.
KNM officials could not be reached for comment at the time of writing.
Two weeks ago, the High Court of Malaya approved Octagon’s application for legal protection against bankruptcy. This comes in the form of an ongoing three-month restraining order between May 16 and Aug 13 this year.
The restraining order follows Octagon’s announcement in December 2011 of its debt restructuring scheme which may include a proposed capital reduction and debt settlement with the company’s lenders.
In a statement to Bursa Malaysia, Octagon said it was not able to fulfil its debt obligations due to “obstacles and prolonged delays” in getting policymakers’ consent for the implementation of its projects.
In October 2011, Octagon awarded two waste-to-energy projects in Sri Lanka with a combined value of US$222 million to KNM. They were the construction of a US$22 million advanced thermal gasification reactor and a US$200 million waste-to-energy facility in Sri Lanka’s capital Colombo.
KNM’s latest financials have improved on a stronger order book and higher revenue recognition from its projects. Net profit in 1Q rose 84% to RM35.05 million from a year ago while revenue was up 42% to RM585.83 million.
The group is now undertaking oil sand projects in Canada, where oil majors have pumped in more investments.
OSK Research analyst Jason Yap, who downgraded KNM shares to “neutral” from “trading buy”, said the neutral recommendation was by virtue of uncertainty over KNM’s ability to consistently maintain its financial performance.
According to Yap, the ongoing sovereign debt crisis in Europe may curb crude oil demand and delay global oil and gas projects. At the same time, he is also mindful that KNM will still have to compete with rival process equipment producers from China and South Korea for more jobs.
Yap said the Chinese and South Korean players are operating on excess capacity and may slash prices at the expense of profit margins, hence, posing a threat to KNM’s competitiveness in the global market.
This article appeared in The Edge Financial Daily, June 1, 2012.
