HIBISCUS : The Legendary Bunga Raya and its Comrade = Dagang NexExchange (DneX)
(This is not a stock call but rather some useful information to be shared out)
Owners of Anasuria:
Hibiscus Petroleum 50% ( Ping Petroleum Owned 1.87% after dilution, before 4.88%)
Ping Petroleum: 50% (Dnex holds 30% of Ping Petroleum)
Sources 1
Sources 2
Profitability:
Operating Expenses: US $20 per barrel
Current Market Price: USD 55 per barrel
Average daily production: 10,000 barrel per day
Expected gross profit 1Year: USD 91.25 mil
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1) HIBISCUS PETROLEUM
To remind, in August 2015, Shell reached an agreement to sell a batch of its North Sea oil fields to Ping Petroleum Limited and Hibiscus Petroleum whereby each of the two companies acquired 50% of the entire interests of Shell UK Ltd, Shell EP Offshore Ventures Limited and Esso Exploration and Production UK Limited in the Anasuria Cluster of oil and gas fields.
The group recorded a 16-fold higher profit after taxation of RM80.5 million ($19.5M), an increase of RM 91.5 million ($22.2M) versus a loss after taxation of RM11 million ($2.7M) in the corresponding three-month period ended March 31, 2015.
(source: offshoreenergytoday.com)
The price of Hibiscus surged to the high of 39cent following from the stellar profit for Sep 2016 released on 25 Nov 2016 together with the rally in world oil prices.
Following from the last investors presentation which was held after the release of full year result, most investors were upbeat on the future profitability of the company. The valuation of the company appear attractive @ 0.53x its tangible value . (the illustration below used RM 0.20)
Againts its larger peers (E&P companies in Norweign & UK North Sea), Hibiscus's is deeply undervalued.
Technical View:
From my earlier post (Stock picks for December 2016), I mentioned about the next possible target price to be RM 0.55. Yes, I would think this is possible to achieve if Brent oil continues to rally to surpass the USD 60 per barrel mark.
Current price @ 0.385 (20/12) closing is the crucial line for hibiscus to hit the next target price. If the price is able to maintain above 0.385 to 0.41 channel this week. Holders can queue to sell from 0.45-0.51. However, if it fails to break above the channel, I think it is best to take profit and look for re-entry level, in this case 0.36/0.33/0.30.
Pros & Cons:
The pros:
- Inheherent value of Anasuria cluster has yet to be fully recognised. It is a brownfield asset.
- Cost management - Plans to reduce operation expenses and increase profitability moving forwards.
- Cash rich with no debt
- Expansion : North Sabah assets (Read more )
The cons:
- Frequent fundraising exercises
- Uncertainty in oil markets. The current oil rally could be short-lived as most O&G are struggling to increase production to stay in the business. Large hedges in oil futures was reported at current level by shale companies.
Company news:
Owners of Anasuria:
Hibiscus Petroleum 50% ( Ping Petroleum Owned 1.87% after dilution, before 4.88%)
Ping Petroleum: 50% (Dnex holds 30% of Ping Petroleum)
Sources 1
Sources 2
Profitability:
Operating Expenses: US $20 per barrel
Current Market Price: USD 55 per barrel
Average daily production: 10,000 barrel per day
Expected gross profit 1Year: USD 91.25 mil
-------------------------------------------------------------------------------------------------------
1) HIBISCUS PETROLEUM
To remind, in August 2015, Shell reached an agreement to sell a batch of its North Sea oil fields to Ping Petroleum Limited and Hibiscus Petroleum whereby each of the two companies acquired 50% of the entire interests of Shell UK Ltd, Shell EP Offshore Ventures Limited and Esso Exploration and Production UK Limited in the Anasuria Cluster of oil and gas fields.
The group recorded a 16-fold higher profit after taxation of RM80.5 million ($19.5M), an increase of RM 91.5 million ($22.2M) versus a loss after taxation of RM11 million ($2.7M) in the corresponding three-month period ended March 31, 2015.
(source: offshoreenergytoday.com)
The price of Hibiscus surged to the high of 39cent following from the stellar profit for Sep 2016 released on 25 Nov 2016 together with the rally in world oil prices.
Following from the last investors presentation which was held after the release of full year result, most investors were upbeat on the future profitability of the company. The valuation of the company appear attractive @ 0.53x its tangible value . (the illustration below used RM 0.20)
Againts its larger peers (E&P companies in Norweign & UK North Sea), Hibiscus's is deeply undervalued.
Technical View:
From my earlier post (Stock picks for December 2016), I mentioned about the next possible target price to be RM 0.55. Yes, I would think this is possible to achieve if Brent oil continues to rally to surpass the USD 60 per barrel mark.
Current price @ 0.385 (20/12) closing is the crucial line for hibiscus to hit the next target price. If the price is able to maintain above 0.385 to 0.41 channel this week. Holders can queue to sell from 0.45-0.51. However, if it fails to break above the channel, I think it is best to take profit and look for re-entry level, in this case 0.36/0.33/0.30.
Pros & Cons:
The pros:
- Inheherent value of Anasuria cluster has yet to be fully recognised. It is a brownfield asset.
- Cost management - Plans to reduce operation expenses and increase profitability moving forwards.
- Cash rich with no debt
- Expansion : North Sabah assets (Read more )
The cons:
- Frequent fundraising exercises
- Uncertainty in oil markets. The current oil rally could be short-lived as most O&G are struggling to increase production to stay in the business. Large hedges in oil futures was reported at current level by shale companies.
Company news:
Link for investors' presentation slides
2) DAGANG NEXEXCHANGE (DneX)
VEP contract to boost its core earnings.
Apart from steady earnings from NSW, its IT and e-services earnings for FY16 are fueled by the Vehicle Entry Permit (VEP) contract secured in February this year. The contract involves setting the system for the government to register foreign vehicles entering the southern border of Peninsular Malaysia and charge RM20 for every entry. Subsequently, DNEX is aiming to secure the maintenance contract for the system installed, which could potentially generate recurring income. Additionally, we believe there is an opportunity for DNEX to replicate the similar business model on the northern border of Peninsular Malaysia.
Maiden earnings from O&G segment.
In August, DNEX completed its acquisition of OGPC Group, an oil and gas equipment and services provider. We are guided that OGPC’s earnings had remained resilient at in 2015 at c.RM20m despite the industry downturn amidst weak oil prices. Meanwhile, DNEX’s O&G segment is expected to benefit from the three-year USD70m directional drilling contract secured from Petronas Carigali earlier in May this year. Additionally, DNEX will generate associate income from its 30% stake in Ping Petroleum, which has 50% stake in the Anasuria cluster. The cluster which consists of four producing oil fields is located c.175km east of Aberdeen, UK North Sea and has 2P oil reserves of 20.25m bbls (net to Ping Petroleum). The field is currently producing at 6.4k bbl/day and with an operating cost of USD23/bbl. Having said that, we do not discount the possibility of the field requiring further drilling program in order to further boost production.
(Sources: Affin Hwang)
Technical View
Dnex is currently trading above its 200 days moving averages which should be supported at 0.235 - 0.245 context. It's currently heading towards the neck of major trend which is around 0.265-0.28. Breaking it, we could see the counter to reach previous high @ 0.31. However, if fail, it should trade sideways at around 0.27 - 0.28 levels.
Weekly chart shows that the bull will come into force if it could stay above 0.29 convincingly for this week. Next possible target price is 0.40 once 0.31 is achieved and broken upwards.
Ping increasing stakes or Emergence of new shareholders?
The recent private placement which is expected to raise RM 14.43 mil funds representing about 6.05% at RM 0.29 certainly is a bold move. It's not surprised if Ping Petroleum is the potential subscriber after its existing shareholding is diluted after a series of private placements by Hibiscus (see pic). If that's the case, DneX could see another reason to move higher from 14/12 closing's @ 0.255.
Well, if not, a new emergence of shareholder with 6.05% is definitely a plus point to Hibiscus. Let's watch for further announcement.
Sources:
Link 1
Affin Hwang's research
2) DAGANG NEXEXCHANGE (DneX)
Two-year extension of NSW.
DNEX has alleviated investors’ concern over its operation of core business, National Single Window (NSW), the trade facilitation system to expedite paperless custom clearance process with the successful two-year extension until September 2018 from the government. The service charge remains unchanged at 75.0 sen/kb for government agencies, 80.0 sen/kb for the private sector and RM5/successful application. This allows DNEX to prolong its exclusivity
DNEX has alleviated investors’ concern over its operation of core business, National Single Window (NSW), the trade facilitation system to expedite paperless custom clearance process with the successful two-year extension until September 2018 from the government. The service charge remains unchanged at 75.0 sen/kb for government agencies, 80.0 sen/kb for the private sector and RM5/successful application. This allows DNEX to prolong its exclusivity
for another two years before switching to uCustoms under a new framework to allow users to choose their preferred service providers.
VEP contract to boost its core earnings.
Apart from steady earnings from NSW, its IT and e-services earnings for FY16 are fueled by the Vehicle Entry Permit (VEP) contract secured in February this year. The contract involves setting the system for the government to register foreign vehicles entering the southern border of Peninsular Malaysia and charge RM20 for every entry. Subsequently, DNEX is aiming to secure the maintenance contract for the system installed, which could potentially generate recurring income. Additionally, we believe there is an opportunity for DNEX to replicate the similar business model on the northern border of Peninsular Malaysia.
Maiden earnings from O&G segment.
In August, DNEX completed its acquisition of OGPC Group, an oil and gas equipment and services provider. We are guided that OGPC’s earnings had remained resilient at in 2015 at c.RM20m despite the industry downturn amidst weak oil prices. Meanwhile, DNEX’s O&G segment is expected to benefit from the three-year USD70m directional drilling contract secured from Petronas Carigali earlier in May this year. Additionally, DNEX will generate associate income from its 30% stake in Ping Petroleum, which has 50% stake in the Anasuria cluster. The cluster which consists of four producing oil fields is located c.175km east of Aberdeen, UK North Sea and has 2P oil reserves of 20.25m bbls (net to Ping Petroleum). The field is currently producing at 6.4k bbl/day and with an operating cost of USD23/bbl. Having said that, we do not discount the possibility of the field requiring further drilling program in order to further boost production.
(Sources: Affin Hwang)
Technical View
Dnex is currently trading above its 200 days moving averages which should be supported at 0.235 - 0.245 context. It's currently heading towards the neck of major trend which is around 0.265-0.28. Breaking it, we could see the counter to reach previous high @ 0.31. However, if fail, it should trade sideways at around 0.27 - 0.28 levels.
Weekly chart shows that the bull will come into force if it could stay above 0.29 convincingly for this week. Next possible target price is 0.40 once 0.31 is achieved and broken upwards.
Ping increasing stakes or Emergence of new shareholders? The recent private placement which is expected to raise RM 14.43 mil funds representing about 6.05% at RM 0.29 certainly is a bold move. It's not surprised if Ping Petroleum is the potential subscriber after its existing shareholding is diluted after a series of private placements by Hibiscus (see pic). If that's the case, DneX could see another reason to move higher from 14/12 closing's @ 0.255.
Well, if not, a new emergence of shareholder with 6.05% is definitely a plus point to Hibiscus. Let's watch for further announcement.
Sources:
Link 1
Affin Hwang's research
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Luiki
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