PRM buys 70% stake in Big Sea, to reap Big Sea's revenue, profit immediately after acquisition, confident of strong 2nd half year results, rapid growth
PRM has bought 70% shares in Big Sea, a major domestic maritime petroleum transportation service company, for THB 1.4 billion, and will acquire the remaining 30% gradually over a three-year period for approx. THB 800 million. The combined project value is expected to range between THB 2-2.3 billion (depending on business performances), and the IRR to reach 11.7%. The capacity of PRM to perform maritime crude oil transportation will be enhanced, and with new customers from Big Sea its market share will jump to 49%. The acquisition will strengthen PRM's business in the long run and allow the company to benefit from the growing domestic oil transportation industry.
Acting Sub-Lieutenant Chanwit Anakkul, chief executive of Prima Marine Public Company Limited (PRM), Thailand's top provider of integrated floating storage services for crude oil, petroleum, condensate residue and liquefied petrochemical products, as well as services involving offshore support vessels and fleet management for oil and petrochemical industry, to domestic and international customers in the Asia-Pacific region, revealed that PRM has completed the initial purchase of 252,000 shares in Big Sea Co, or 70% of the target firm's shares, for approx. THB 1.4 billion, which will allow the former to book the latter's revenue and profit immediately, starting Q3 2018, and improve its second half year results dramatically.
In the second phase, PRM will gradually buy the remaining 108,000 shares in Big Sea, or 30% of the latter's shares, from TWATT Limited, by acquiring 10% per year over a period of three years, subject to the latter's satisfactory performance. Based on current data, the share purchases in the second phase are projected to be completed by 2021 and require not more than THB 800 million in investment cost, meaning that the share acquisitions in both phases will require a total of approx. THB 2-2.3 billion in investment cost and provide an average internal rate of return (IRR) of 11.7%.
The chief executive added that the acquisition of Big Sea shares will double PRM's capacity in the transport vessel segment, enable the company to become the top provider of domestic maritime oil transportation service (with a 49% share in the market) and increase its capacity to manage additional 5 billion liters of products per year and to better respond to customers' requirements. For example, its market shares will leap from 15% to 43% for Chevron, from 19% to 64% for Shell, from 19% to 52% for IRPC and from 67% to 69% for PTT. It will also win a market share of 37% - in terms of volume of oil transported by vessels - for Bangchak as a new customer.
The deal will also create the opportunity for PRM to grow in the future, as well as enhance its operating efficiency and benefit from the growing domestic oil transportation industry. It will be able to better manage its fleet to respond to the increasing demand for its services, including for the oil transport route to Thailand's southern region, where tourism is booming and fuel demand is rising. This will improve its second half year results significantly and allow it to post rapid growth for the period.
Big Sea is a domestic maritime petroleum transportation service company with the second highest market share. Owning a small fleet of 13 transport vessels with an average life of 17.3 years and an average storage capacity of 2.7 million liters each and approx. 35,000 DWT (approx. 35 million liters) in total, it has executed short-term service contracts (with service durations not longer than one year) for three vessels and long-term service contracts (with service durations longer than one year) for 10 vessels. It is also building a new vessel with a storage capacity of 5.3 million liters. The construction is expected to be completed in 2019 and the vessel to be ready for service to Chevron after it has won a long-term contract from the customer.