Long-suffering shareholders of Magnus Energy have endured a stock crash from as high as $3.75 in Feb 2013 to 0.1 cent until the stock was suspended in 2019.

But the coming days are expected to mark the start of a solid turnaround. 


400 CharlesMadhavan 10.14Charles Madhavan was voted into the board of Magnus Energy in Jan 2020 and appointed CEO too. NextInsight file photoShareholders will be submitting their votes ahead of an EGM on the company's promising business diversification plan under new leadership.

If shareholders approve, Magnus Energy can be expected to waste no time progressing work on projects it has recently signed initial agreements on.

In aggregate, the two projects are likely to be worth tens of millions of dollars.

In a Jan 2020 EGM, Magnus gained fresh leadership after shareholders voted in (by a 63.41% margin) Charles Madhavan as an executive director. He was appointed CEO too on the same day.

Business Times then reported: "Nearly 100 mostly mom-and-pop retail investors turned up at York Hotel on Thursday morning for the EGM. Many told The Business Times that they were fed up with the shenanigans in the company, which have cost them their investments."

Mr Madhavan has a deemed shareholding interest of 5.50% in the company, and vows to rebuild shareholder value through taking Magnus forward into new business areas.

Market insiders know that through a lifetime of working in multiple companies and multiple countries, the 62-year-old has strong business connections that span Asia, India and Middle East.

TIMELINE: MAGNUS ENERGY'S RECENT EVENTS

Aug 2019

Jan 2020

July 2020

Sept 2020

30 Oct 2020

Provenance Capital issues external review report

EGM: Shareholders vote in Charles Madhavan as ED, and he is appointed CEO

Magnus receives letters of offers from clients on Indonesia projects

Magnus issues general update on Indonesia projects, etc

EGM
(Business Diversification)


It is his connections that will count when one tries to imagine how Magnus Energy, a depleted entity, can pull itself up from its lows, and march forward.

Depleted indeed -- Magnus Energy currently has him as CEO and three full-time staff members in Singapore.

Magnus Energy has a tainted past as documented by Provenance Capital, an external reviewer engaged by the company.

Provenance published its findings in Aug 2019 on serious issues related to transactions carried out by Magnus' previous management.

(See The Edge Singapore's Nov 2019 article: Penny stock-linked Magnus Energy's past transactions under spotlight as dissenting minorities call for EGM)


It's not exactly the sort of company that large corporations will award contracts to, let alone large contracts.

It follows that it was the connections of Mr Madhavan that have led to two projects in July 2020.

Mr Madhavan roped in partners with financial strength and manpower resources and job track records for the following projects for which they have received letters of offer:

Refurbishment and reactivation of a privately-owned chemical plant in Jakarta, and

Construction of liquefied petroleum gas (LPG) terminals in various parts of Indonesia for a state-owned enterprise.

(Magnus' Sept 2020 update on those projects can be found here.)

Stock price 

0.1 cent

52-week range

Stock trading suspended

Market cap

S$12.6 m

PE (ttm)

--

Dividend yield 

--

NAV

0.04 cent

Shares outstanding

12.6 b

Mr Madhavan this year secured Oriental EPC, a member of the Oriental EPC of India, as a partner with Magnus for the Indonesian projects.

Oriental primarily provides EPC services to major clients in the chemical processing plant, effluent treatment plant, metallurgical, mini refinery, thermal and nuclear power, oil terminal operations, organic and inorganic chemicals and basic infrastructure sectors.

"For the upcoming projects as part of the Proposed Diversification, the Company will mainly be engaged as a service provider for the different projects and has no intention nor the funds to invest."

-- Magnus Energy annual report FY2020

Market insiders say Oriental saw Mr Madhavan as the figure to enable it to penetrate Indonesia for the first time. 

Then there is another biggie, AREA Energy of Taiwan, which provides EPC services for projects such as nuclear power plants, thermal power plants, pharmaceutical factories and civil/structural/architectural/piping construction in Taiwan.

Magnus has entered into a non-binding Heads of Agreement with AREA and Oriental EPC to jointly pursue the Australasian region for engineering, procurement, installation and commissioning type projects.

AREA and Magnus are in the midst of negotiating the terms for a shareholders’ agreement.

WHAT IF ....
What if, surprising as it may sound, the majority of shareholders do not vote for Magnus' business diversification proposal?

Then it will be left with only one operating business -- the 80%-owned Mid-Continent Equipment (USA), which operates in the US' oil and gas equipment distribution business.

The outlook for Magnus could then be bleak, though not as severe as it has been in the past through failed investments and issues related to transactions reported by Provenance Capital.

In FY2020, continuing a multi-year streak of bleeding red ink, Magnus reported a net loss after tax of S$2.2 million.

LOSS after LOSS after LOSS

S$’ m

FY15

FY16

FY17

FY18

FY19

FY20

Net loss to Magnus shareholders

-2.7

-16.5

-7.7

-14.8

-17.5


-2.2


It had cash and cash equivalents of S$3.0 million as at 30 June 2020, assets-held-for-sale of S$4.6 million and negligible long- and short-term debts of S$0.1 million.

That's very little to sustain the company for the long haul, so it badly needs a new lease of life.

The upcoming EGM should provide that badly-needed opportunity.

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