On Tuesday, the offshore support vessel (OSV) provider and offshore drilling rig contractor announced a fourth quarter net profit (Q4 FY2022) that catapulted 3,200% to a record RM153.63 million from RM4.8 million a year ago.
The group’s profit for the year also increased by almost seven times from RM22.7 million to RM171.56 million.
Despite the apparently outstanding results, investors were not impressed and proceeded to dump their shares the next day, with the counter crashing 25% to nine sen from 12 sen the previous day.
Icon’s share price had ran up 44% for the year before taking the tumble yesterday in the wake of their quarterly results. Icon started the year at a low of nine sen before peaking at a year-high 13 sen on Feb 24.
At close of trade today, the stock was back where it started the year at nine sen, giving the company a valuation of RM243.59 million.
The red flags
However, by taking a peek under the hood of their financial statement, savvy investors were able to spot some red flags.
For one, quarterly revenue for FY2022 fell by 29% to RM57.5 million from RM80.6 million in FY2021 due to lower revenue from its offshore supply vessel and drilling segments, as a result of lower utilisation.
Full-year revenue slipped 6% to RM282.57 million, from RM300.6 million in FY2021.
The lion’s share of the surge in Q4 net profit was the RM196.35 million net gain from the disposal of its jack-up rig to Saudi Arabia-based ADES Arabia Holding.
Excluding this sum, the group would be in the red with a net loss of RM42.93 million for Q4 FY2022.
At the start of the year, market observers raised concerns the group was carrying RM449.4 million of debt. This was significantly higher than its market capitalisation. However, the sale of its jack-up rig would have helped allay such fears to some extent.
The Ekuinas connection
Hallmark Odyssey, an investment holding company owned by Ekuiti Nasional Bhd, or Ekuinas, is the biggest shareholder with a 56.03% interest in Icon.
Ekuinas is a private equity fund management company established by the Malaysian government to promote “equitable and sustainable Bumiputera wealth creation and economic participation”.
Government-owned investment companies have a rather unimpressive track record when it comes to investments in the oil and gas services segment.
For example, Permodalan Nasional Bhd’s (PNB) investments in oil and gas services providers like Velesto Energy Bhd and Sapura Energy Bhd have not borne fruit. PNB holds a majority stake in both companies which have fallen into hard times and are now essentially penny stocks.
Founded in 2012, Icon is one of the largest OSV providers in terms of number in Southeast Asia with 20 active OSVs and one active drilling vessel.
On Dec 28, 2022, Icon Offshore paid a special dividend of 6.7 sen per share, after its disposal of the jack-up oil rig to ADES Arabia Holding, the first time it paid out a dividend since its listing in June 2014.
This was a payout ratio of 106.09%.