Icon Offshore eyes M&As

The group aims to be an integrated service provider with broader, more holistic and higher value-added solutions 


ICON Offshore Bhd, one of the largest offshore support vessel (OSV) providers in Malaysia and South-East Asia, plans to transform into an integrated service provider through mergers and acquisitions (M&A) which will be funded by internal cash and borrowings. 

Its MD Datuk Seri Hadian Hashim said the group is currently looking carefully at a few M&A opportunities and at the stage of identifying the right company to acquire. 

He said the group aims to transform into an integrated service provider with broader, more holistic and higher value-added solutions. 

“We want to explore opportunities in maintenance, repair and overhaul (MRO) which have tremendous potential. The plan is to expand our offerings to differentiate us from our competitors and add new revenue streams to the business. 

“The good thing is that MRO is more people and skill-based rather than on machinery. This will complement the upskilling of our current talent base,” he told The Malaysian Reserve. 

Some 40% of Icon Offshore’s revenue is contributed by its OSV business in Malaysia followed by OSV operations in Brunei (30%) and its drilling segment contributes the remaining 30%. 

The group completed its drilling business acquisition in February 2021 which was fully operational in the second quarter of 2021 (2Q21). 

“As seen in our 2Q21’s results, this segment will provide a substantial contribution to our revenue and bottom line moving forward. Our plan is to increase this segment’s contribution through integrated well services offering,” said Hadian. 

Icon Offshore reported a 33-fold year-on-year (YoY) jump in 3Q21 net profit to RM14.37 million primarily due to contribution from its drilling segment which commenced operations in April this year. 

Revenue for the 3Q21 increased 66.01% YoY to RM87.28 million boosted by the drilling segment’s contribution and higher revenue from the OSV segment. 

Optimism on Oil Price Trajectory

Hadian believed that Icon Offshore is in a good position now to embark on a new growth trajectory with crude oil prices expected to remain strong. 

“Underinvestment in the sector, bigger dividend payouts by oil majors and the generally higher spending on environmental, social and governance (ESG) areas are also fuelling the current high prices. 

“I believe Icon Offshore will remain profitable as 2022 is expected to be a recovery year for the country’s economy following the administration of booster shots and the tourism sector reopens,” he reckoned. 

Global financial major Goldman Sachs Group Inc had forecast crude oil prices to reach US$110 (RM465) per barrel by next year from the current levels of US$65 to US$70 per barrel. 

OPEC secretary-general Mohammad Barkindo stated that oil will continue to be the fuel with the single largest share of the global energy mix by 2045, meeting 28% of energy demand despite calls and investments to develop renewables.

Barkindo who presented OPEC’s World Oil Outlook recently said the global oil demand is expected to continue to grow into the mid-2030s to 108 million barrels per day after which it is set to plateau until 2045. 

New Man at The Wheel 

Hadian took the helm of Icon Offshore in September 2019 with the task of turning the group around. 

He started his career with Sarawak Shell Bhd and left after 12 years, to venture into business to pursue his entrepreneurial interests in various oil and gas (O&G) companies, notably Itochu Pipe and Tube Asia Corp Sdn Bhd and Integrated Petroleum Services Sdn Bhd. 

Despite challenging business conditions in the financial year 2020 (FY20), Icon Offshore has managed to achieve a significant turnaround after incurring losses for the last five years. 

A big factor in this turnaround is the group’s completion of its debt restructuring and raising of funds through the rights issue. 

This has helped to strengthen Icon Offshore’s balance sheet and has enabled the unlocking of new capital resources for the group to utilise in its operating and business activities. 

The improving financial performance has attracted analysts’ interest. Online broker Rakuten Trade Sdn Bhd stated that Icon Offshore is expected to register net earnings of RM30.5 million and RM45.3 million for FY21 and FY22, respectively. 

It has a ‘Buy’ call on Icon Offshore with a target price of 17 sen based on a price to earnings multiple of 10 times. 

“Its financial leverage is manageable with net gearing of 0.6 times supported by a decent interest coverage ratio of 3.75 times as of the cumulative nine months of FY21. 

“Our ‘Buy’ recommendation is premised on its strong earnings visibility and growth potential underpinned by its RM770.6 million outstanding orderbook, increasing utilisation rate as a result of recovery within the O&G sector post-pandemic and reasonable valuations,” a recent Rakuten research report on Icon Offshore noted. 

Aim To Bid for Long-term Contracts

Icon Offshore’s orderbook as at Sept 30, 2021, stood at RM770.6 million, comprising RM732.5 million for the OSV segment and RM38.1 million for the drilling segment. 

Long-term contracts represent 94% of the orderbook which will provide cashflow stability and earnings visibility. 

Its tender book now is RM920 million comprising 76% for the OSV segment and 24% for the drilling segment. 

Hadian said the group will continue to focus on operational efficiencies, seek to secure new contracts, maximise utilisation rate through competitive bidding for domestic and regional contracts, as well as leveraging on its continued presence in Brunei and maximising synergies between the OSV and drilling segments. 

“Optimal vessel management continued to be a priority for the group, as OSV remains our core business segment. We continue to build upon various optimisation initiatives to sustain vessel utilisation and availability rates while controlling costs. 

“Through technology adoption such as asset monitoring systems and greater management involvement, we have reduced breakdown days of our OSV vessels by more than 60%, which in turn has lowered our costs of repairs and maintenance,” he added. 

At present, Icon Offshore has a fleet of 26 OSVs, of which 20 are active. The year-to-date utilisation of active vessels is 90% as at September 2021 compared to a utilisation rate of 72% in FY19. 

“Seventeen OSVs are operating in Malaysia with another three working in Brunei. We have six laid-up vessels and are planning to re-activate one while aggressively marketing to sell the remaining five vessels,” he said. 

ESG Remains a Core Tenet 

Hadian said Icon Offshore hopes to explore renewable energy initiatives to further reduce the group’s carbon footprint as sustainability remains crucial to its operations and ability to generate both financial and non-financial values. 

At present, two of its OSVs are diesel-electric vessels optimized by hybrid propulsion. The company also uses an electronic fuel monitoring system (EFMS) on five of its fleet and aims to add another one in 2022. 

“Currently, our fuel saving is at 11.3% in 2020 and it is expected to reduce further with additional EFMS. 

“We continue to strive towards improving our performance across a wide range including occupational health and safety, greenhouse gas emissions, fuel consumption, water consumption, waste management, talent management, and corporate integrity and ethical conduct,” Hadian added. 

Icon Offshore was last traded at 10.5 sen, valuing the company at RM284 million. 


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