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Kuok unit halts Singapore IPO drought with $400m offering

An eight-month drought in big initial public offerings in Singapore has been halted by the pricing of an almost $400m offering by a unit of Malaysia's Kuok Group of the biggest Asia-based operator of offshore support vessels for the oil and gas industry.

The offering by PACC Offshore Services Holdings (Posh) was oversubscribed, company officials said. The IPO price was set at S$1.15 ($0.92) a share, which would give it a market capitalisation of about $2bn. Trading starts on Friday April 25.

The IPO is the largest in Southeast Asia so far this year, according to Dealogic. It is also the largest on SGX, the Singapore exchange, since a $378m IPO by Soibuild Business Space, a real estate investment trust, in August last year.

Posh is the offshore vessel unit of KSL Group, one of three main holding companies through which the Kuok Group - a Malaysian conglomerate with investments in commodities, hospitality, logistics, real estate and shipping - operates. The other two are Kuok Brothers in Malaysia and Kerry Holdings in Hong Kong.

The Kuok group is the single largest shareholder group in listed companies such as Shangri-La Asia, a hotel operator, and the publisher of the South China Morning Post newspaper.

The Posh offshore vessels business earns revenue mostly by chartering its vessels, and provides anchor handling, ocean towage and installation services.

Its fleet operates in oilfields around Asia, Africa and Latin America that are operated by large oil companies, or their contractors such as Saipem, Hyundai Heavy Industries and Technip.

Posh anticipates growth in demand for semi-submersible accommodation vessels - also known as "floatels" - as oil and gas companies expand offshore exploration in Mexico, Brazil and other locations.

The company has on order two such vessels. They can each accomodate 750 workers who live on board and walk to work on offshore oil rigs against which the vessels are docked for the life of the project.

Seow Kang Hoe, Posh chief executive, predicted the Brazilian market would grow fastest for use of such vessels, which he described as "almost like cities in the sea". That would help grow the offshore accommodation side of the group's business to about half of group revenues by next year, up from 25 per cent now.

"Brazil is relatively new development. But with all the [exploration] construction work going on we see demand for floatels continuing," said Mr Seow.

Posh said it will use the proceeds of the IPO to reduce net debt from S$800m to about S$500m.

Its board has already approved a capital expenditure programme of US$292m for the expansion of its fleet in the offshore supply vessels, transportation and installation and harbour services.

Mr Seow played down any threat to the pace of offshore exploration from the shale gas revolution in North America. He acknowledged it was "another form of competition", but said there was enough offshore exploration going on, especially in Bangladesh, Myanmar, Cambodia "and all the way to Sakhalin in the east", referring to the Russian island just north of Japan.

"Regardless of the oil price all this work has to go on," he said.

Posh is being advised by Bank of America Merrill Lynch, DBS and Oversea-Chinese Banking Corporation.

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