Magnus Energy's new board's priority will be to boost sales: activist shareholder

CHARLES Madhavan, one of the two activist shareholders instrumental in ousting Magnus Energy's chairman, two directors and independent auditor, wants to leverage on his network of experts and business partners in the oil and gas sector to resurrect the Catalist firm.

At a recent interview with The Business Times, Mr Madhavan, 61, shared his frustrations, shock discoveries and plans if his team gains control of the board. Magnus is an investment holding company which derives nearly 70 per cent of its revenue from its 55 per cent stake in Mid-Continent Equipment Inc, an oil and and gas equipment distribution business in the US. Its share price has plummeted from 40 Singapore cents in October 2014 (before the start of the conversion of the convertible notes to shares) to as low as 0.1 Singapore cent before trading was suspended on Aug 23 following "the relentless issuance of convertible notes by the company and the subsequent conversion of those notes into shares".

"This is not an ego trip,'' said the man who was Magnus managing director from April 2 to May 26 in 2018 following a share placement exercise when asked why he was doing this. "You are talking about money invested by 11,000 moms and pops. Many have given up hope of getting money back,'' he said.

Mr Madhavan said it took him less than a month to notice something was amiss in Magnus. "They had huge receivables with no collaterals. They made huge money transfers which didn't make sense,'' he revealed.

From FY2015 to FY2018, Magnus raised gross proceeds of S$31.3 million, and used about S$20 million. It had issued a staggering number of new shares during the period, amounting to 11.5 billion shares. The group had reported losses for the last six fiscal years from FY2013 to FY2018. It recently asked for more time to release its results for FY2019. Mr Madhavan was terminated because of "differences with management and board". He sued the company for wrongful termination. This was subsequently settled.

Mr Madhavan - who has a deemed interest of 5.5 per cent in Magnus (about 695 million shares) via stakes held by Blue Water Engineering, Idola Cakrawala International and Sng Lee Leng, his spouse, as of Sept 20, 2019 - believes Magnus should be worth a lot more if not for the "years of abuse". External reviewer Provenance Capital findings do point to some shortfalls in policies and board practices.

With only one director, Seet Chor Hoon, remaining, Mr Madhavan and supporting shareholders have on Nov 7 given Magnus a requisite notice to convene an extraordinary general meeting (EGM) within 21 days to fill the vacancies, or they will exercise their rights to convene one by themselves.

"There is, effectively, no board, no auditor. The company is in a limbo, and should call an EGM," Mr Madhavan said.

Meanwhile, he has solicited help from old business partners in the oil sector and bankers to help revive Magnus if they gain control of the board.

The team includes Christopher O'Connor, partner and chief investment officer of Golden Rock Capital, a Monetary Authority of Singapore (MAS) regulated firm with interest in Myanmar and South-east Asia; Anthony Kuek, the former non-executive chairman and independent director at another Singapore-listed firm GSS Energy; Ong Chin Yew, former sales director at Lim & Tan Securities and Baldwin Foo, a financial consultant with more than 20 years' experience including a stint at Otto Marine Singapore.

"The first thing I need to do is to boost revenue, sales and get more clients for Mid-Continent, which is an ongoing business,'' Mr Madhavan said.

He talked excitedly about the many projects that he has at hand, from a potential oilfield project and a mini-refinery in Indonesia, and how he intends to help Mid-Continent compete for the supply chain for these projects.

As for Magnus's micro-algae plant in Malaysia, he needs to see if there is anything left worth salvaging. "This is a pilot plant. It is not meant to make money. It is meant to proof a concept. If that concept is proven, I intend to set up a big plant 10-20 times its size in Asia,'' he said.

If it works, the plan is to incorporate the algae plant into a mini-refinery at Riau, Indonesia, to make bio-diesel.

"I will form an engineering, procurement, construction (EPC) company, using Magnus itself or have a subsidiary of Magnus, to be a partner with my Indian partners, Oriental Group, which has interest in the mini-refinery."

There are also plans to venture into Myanmar and Abu Dhabi, where the Supreme Petroleum Council (SPC) has approved a five-year, US$132 billion investment plan proposed by Abu Dhabi National Oil Company's (Adnoc) aimed at increasing the United Arab Emirates' oil and gas production capacity.

"I intend to bring Magnus and Mid-Continent back into Abu Dhabi because the drilling programme is huge there, and we just want a few per cent of that,'' he said.

Asked how he intends to fund his vision for Magnus, Mr Madhavan believes that with the right people onboard, his partners will be willing to invest. "The plan is to get Magnus and Mid-Continent back in the game, and then let professionals run the company,'' he said.

On why Magnus was allowed to repeatedly raise funds and dilute shares over the years, he lamented this was because "people don't attend annual general meetings and vote".

Mr Madhavan's interest in the oil sector started as early as when he was 15. When most Singaporean kids were studying at that age, he was an apprentice diver and welder "carrying pipes and running around" at Vosper Thornycraft Shipyard. After two years, he joined the Singapore Navy as a diving supervisor, and was involved with a variety of underwater tasks including bomb disposals to salvaging projects. It is this skill set that took him to many different places in the world from Egypt and Cyprus to Sudan and Congo as he ventured into the oil and gas industry.

"I am not highly educated, and may not understand contract law. But I can ask the right questions,'' he said.

Angela Tan, Business Times

20 November 2019