There has been a lot of development in this company, and I notice that insiders have been buying up the shares -- see SGX website announcements. Analyst from DMG has started coverage. The share price (30 cents) has 100+% upside according to analyst. Any views out there among forumers?
This is a very attractive business model should Giken be able to ramp up its acquisition and development within the near term. The development of Old wells essentially taking out the E in E&P as exploration conducted years ago have predetermined the existence of oil. That said, drilling/restoring the wells are relatively low risk. However, I feel that costs could vary greatly should the well be badly damaged and requires additional drilling/increase in pumping.
In the SGX universe, Giken has the fastest growth story as compared to Kris or RH Petrogas. As with all E&P, cash flow is an issue but not in the case for Giken which has existing oil production. With a fixed selling price and royalties etc, Giken is given favourable contract terms as compared to PSCs. This also provides a certain stability with fixed selling prices but it may be revised should oil prices weakens. Cash flow not a main concern and shareholders should not fear equity dilution as in the case of most locally listed E&P firms.
I disagree with the osk analyst in saying that Giken is severely undervalued. As a relatively new player, track record and ability to secure more contracts will lead to a re-rating. As of now, I am waiting to see if management can continue its aggression expansion and maybe reward shareholders when the FY ends.
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"Oil and oil related industries are examplary. For the past one or two months I repeatedly suggested to buy oil related stocks at low price level, the reason being oil price already had tumbled enough. Besides, the investment guru Warren Buffett bought substantial amount of the US listed oil and oil related stocks during the past two months. Warren Buffet is a human, not the God; he could not guarantee the oil price was at the lowest level when he entered the market, he was just saying the oil price was already very cheap, and as long as the price is cheap and under valued, the stock is worth investing, and wait patiently for its rebound. Patience is vital to make big money."