Millions and Billions

Two interesting articles in The Edge.

Shell Malaysia gets MTO at RM1.92 per share


The offer was triggered after MHIL's conditional sale and purchase agreement for 51% of Shell Refining, signed in February 2016 with Shell Overseas Holdings Ltd, turned unconditional today, Shell Refining said in a filing on Bursa Malaysia today.


I wrote before about this matter. The acquirer wants to retain the listing status, which means this is a "friendly" offer, minority shareholders can simply accept or reject the offer, there is no pressure.

The second article:

Konsortium PetroHub to raise US$180 bil over next 5 yrs for refineries in Kedah

Konsortium Asia PetroHub (KPHUB) expects to raise US$180 billion in funds over the next five years for its oil refinery facility construction project in Kedah known as Sultan Abdul Halim Refinery Complex.

The consortium was formed by a group of companies, namely IMC London, a group of bankers and funders based in Britain who have a 50% share, as well as VR4U Technologies Sdn Bhd with a 30% share and another local based company with a 20% share.

The amount raised will be used to fund four additional refineries over the next five years. There are six refineries to be developed in total and the first two will be developed starting January 2017.


Both articles about refineries, but there is something rather "strange" going on if we compare the two articles:

• Regarding Shell, at the current share price the whole company is valued around USD 150 Million (that starts with the letter "M")
• Regarding KPHUB, it expects to raise USD 180 Billion (that starts with the letter "B")

The refinery of Shell will be quite old, and probably smaller in size, but does this explain a thousand fold valuation difference? It seems rather puzzling to me.

The article continues: "The second agreement was with QMIS World Trade International, which has close collaborations with various Chinese conglomerates and will act as a listing agent in Nasdaq US and Hong Kong Stock Exchange to raise funds for the project."

I tried to Google on "QMIS World Trade International", expected to find a company with lots of experience in this matter, having done dozens of multibillion dollar deals on many international exchanges. But I could not find anything relevant, it even looks like they have no website, a fate they seem to share with VR4U Technologies Sdn Bhd .

Lots of questions remain .......

Shell Malaysia: shocker (3)

At the very least the current, faithful minority shareholders of Shell deserved a much better explanation than previously provided by the company.

I think the Board of Directors also came to that conclusion (possibly pressured by some organisations like MSWG), therefore they announced today a media release, which can be found here.

It is much better than the previous information, is not clouded in legal terms and gives a background of the reasoning behind the deal and the price per share.

I am sure that most (if not all) shareholders of Shell will still be disappointed, but at least this gives some consolation.

It is possible that Shell's share price has simply been too high over the last years, not in line with its fundamentals and its future prospects. Time will tell.

Shell Malaysia: shocker (2)

In addition to my previous posting on this subject, MSWG wrote this in their weekly newsletter:


Minority shareholders of Shell Refining were shocked with the proposed transaction by their majority shareholders, Shell Overseas, as reflected in complaint letters MSWG received.

The sale transaction to Malaysia Hengyuan is at an approximately RM1.80 per Sale Share. Although it is only 7 % discount to the latest net asset value of RM1.93 per share as at September 2015, it was a huge discount of 63.6% to the market price of RM4.94 as at 29 January 2016 prior to the release of the announcement.

For information, other substantial shareholders are EPF (15.71%), Amanah Saham Malaysia (11.09%) and other minority shareholders are KWAP (2.38%), PNB (1.12%), Khazanah Nasional (1.12%) and Others (17.58%) as per shareholders’ listing as at 30 April 2015.

The negative impact this transaction has on minority shareholders is already happening. Shell Refining shares have plunged from RM4.98 to RM3.68 on 29 January 2016 and would possibly drop further to the SPA price of approximately RM1.80 per share.

We urge the Board of Shell Refining look into the interest of minority shareholders in respect of this acquisition and the subsequent Mandatory General Offer which is expected to be triggered by the new major shareholder.

As for the major shareholder, no doubt the transaction is a private one, but one would expect that certain care and obligations to the existing minority shareholders by the majority considering that they had been with them for a long period of time. Thus, a longer time for more offers to come by so that transaction can be done at a more equitable level to minority shareholders.


Shell was queried by Bursa, and replied the following:


We refer to the query by Bursa Securities Malaysia Berhad dated 4 February 2016 where you have requested for additional information on the “other existing commitments” and “a long term offtake from Shell Refining Company” referred to in the press release issued by our major shareholder, Shell Overseas Holdings Limited (“SOHL”) on 1 February 2016. For your ease of reference, we have reproduced the relevant paragraph below:-

Shell Malaysia Trading will ensure security of supply to its retail and commercial customers in Malaysia and honour other existing commitments through an existing comprehensive supply strategy that includes a long term offtake from Shell Refining Company.

We would like to clarify that in respect of the abovementioned paragraph:-

a)        the phrase “other existing commitments” refers to the existing commitments of Shell Malaysia Trading Sdn Bhd in the course of its business, and is not referring to the existing commitments of Shell Refining Company (Federation of Malaya) Berhad (“SRC” or the “Company”);

b)       the phrase “a long term offtake from Shell Refining Company”, if taken in its full context (reproduced below), refers to an existing strategy which includes an existing long term offtake from SRC. In respect of the terms and conditions of the existing long term offtake between the Company and Shell Malaysia Trading Sdn Bhd, we wish to further clarify that the transaction is related party transaction which has been approved by the shareholders in general meeting. The said agreement is dated 15 October 1985 and shall continue to be in force until it has been terminated by either party, or if there is an event of default. The Board of Directors have not yet received any proposals for a new offtake agreement; and

d)       the Company has not received a take-over notice or offer document from the offeror which may contain further information.

As far as I can see there is no "c)", may be an oversight?

Many questions remain, at least with me. Why the low price, was it because of high future capital expenditure? Or is this may be a combined deal, is there something else going on that we are not aware of?

At the moment the share price of Shell is trading at around RM 3.50, a far cry from its price before the announcement of around RM 4.90. As mentioned by MSWG, this is indeed a very old listed company and some shareholders must have held on to the stock for a very long time. I think they deserve at least a better explanation.

Shell Malaysia: shocker

Shell Refining today announced the disposal of 153 Million shares by the major shareholder.

Absolutely shocking was the low price, only RM 1.80 per share.

Here is the 5-year chart of Shell:

The attachments containing the press release and the press notice do not give any more background on this rather remarkable deal.

What is going on here, am I missing something?