SINGAPORE (Jan 23): Sydney Yeung, group CEO and controlling shareholder of GSS Energy, is offering to acquire the key operating subsidiary of the company, Giken Sakata (S).

“The company is still considering and formulating a response with respect to the potential transaction. “No definitive agreements have been entered into and there is no certainty that the potential transaction will be consummated,” said the company on Jan 23.

The transaction will require an independent valuation of the parts to be bought, and approval of GSS Energy’s minority shareholders.

Yeung holds 18.65% of the company.

Giken Sakata is in the business of making precision parts. It also has an interest in some oil fields in Indonesia. 

However, the company struggled for years to get its oil production business in Indonesia going.

On June 17, GSS Energy announced the sale of an 80% stake in its oil production subsidiary, GSS Energy Trembul to an entity called Oakhurst Investment Pte Ltd for a nominal sum of US$1 and assumed debt of just over $3 million.

In return, the buyer will bear all the subsequent costs of getting production started, while GSS Energy will keep its 20% share of the proceeds.

For the three months ended Sept 30 2019, GSS Energy reported earnings of $1.6 million, up 22.6% y-o-y. Revenue in the same period was down 1.8% y-o-y to $28.7 million. 

With no revenue from the oil business yet, the revenue and earnings were practically all contributed by the operating subsidiaries which Yeung plans to buy.

If the sale to Yeung goes through, GSS Energy will only be left with the 20% stake in the oil fields.

As at Sept 30 2019, the company’s net asset value was 9.84 cents per share, compared to 9.45 cents as at Dec 31 2018.

GSS Energy shares closed at 8.8 cents, down 8.33%.

At this level, the company is valued at 18.64 times historical earnings and has a market value of $43.7 million.