Dahua Jixian: Malaysia International Shipping's merger and acquisition of Bumi Amada faces huge resistance

Analyst Dahua Jixian pointed out that since shareholders and stakeholders of the two companies may oppose the merger, and there is a lack of financial synergy between the two parties, it is difficult for Malaysia International Shipping to acquire Bumi Amada.

“Although the merger of the two parties may bring complementarity and synergy effects in some businesses, we believe this merger and acquisition plan is facing too much resistance.”

He added that Bumi Amada is involved in a long-term payment-related dispute over the Armada Sterling V floating storage and offloading production tanker (FPSO), which may also affect the above merger and acquisition plans.

Furthermore, even if it is just a merger of the two parties' FPSO businesses, analysts believe this will face resistance from India's Shapoorji Pallonji Energy (SPE).

“SPE was an important partner of Bumi Amada after entering the FPSO field in 2014, and the company recently got rid of operational difficulties and became a common competitor of Malaysia International Shipping and Bumi Amada.”

At the same time, he said that Bumi Amada's undersea fleet operating in the Caspian Sea is still suffering, which will become a significant drag after Malaysia International Shipping completes its acquisition.

Overall, the analyst pointed out that Malaysia International Shipping is still undervalued, thus maintaining the stock's “buy” rating, and that investors should take the opportunity to “sell” arbitrage after the recent sharp rise in stock prices.

Local financial media “The Edge” previously quoted people familiar with the matter as reporting that Malaysia International Shipping is in discussions with the shareholders of Bumi Amada to acquire a large amount of shares in the latter.

In response, Malaysia International Shipping issued a statement after the market closed on Tuesday (9th) explaining that the company is continuing to explore expansion opportunities, but no progress has been made so far.

Following the release of related reports, Bumi Amada's stock price rose again. As of yesterday's market closure, it had increased by more than 10% during this period.

The market closed today. Bumi Amada reported 59.5 cents, a slight decrease of 0.5 cents or 0.83%, and the trading volume reached 40.39 million shares.

Malaysia International Shipping reported RM8.67, a decrease of 8 cents or 0.91%, with a trading volume of 3.11 million shares.