Excerpts from analyst's report

YanKe11.14Religare analyst: Yan Ke (left)

How asset acquisitions have transformed Giken Sakata into a highly cash generative onshore oil field play

Singapore-listed Giken Sakata (Bloomberg Ticker: GSS SP) has transformed into an onshore oil field play post its acquisition of Indonesian oil & gas assets via share acquisitions in Cepu Sakti Energy (CSE).

While GSS’s legacy business is precision machining and engineering, the listed company has now become primarily an Indonesia onshore oil field company due to its announced acquisitions.
 
sydneyyeung8.14Sydney Yeung, recently-appointed CEO of Giken Sakata. NextInsight file photo.The company’s initially acquired oil fields, named Dandangilo-Wonocolo and Tungkul, are located in Central Java and already producing oil.

CSE (via PT Ceput Sakti Energy, PT CSE) holds exclusive rights to cooperate in conducting operations for extracting oil from both fields and in return has the rights to 80% of revenue arising from oil produced, with the remaining 20% shared with local cooperatives (KUD/BUMD).

PT CSE, under GSS, later acquired additional fields, named Kawengan, Trembul, and Gabus.

Post-acquisition of CSE, GSS effectively owns 51% of CSE, and hence has a 41% economic interest in the oil produced from the oil fields via its CSE stake. A qualified professional report by the firm Senergy (a member of the Loyd’s Register Group) indicates that the fields have 1P and 2P gross reserves of 5.6 million barrels and 9.6 million barrels respectively.

Including the three most recently acquired fields, for which a Senergy report has yet to be released, we estimate additional 2P reserves based on our model assumptions. This implies estimated gross total 2P reserves of 23.8mmbls.
 


religare11.14S$0.51 target price with upside should additional fields be added
 

GSS has the following current sources of value; 1) the initial fields valued by Senergy and 2) the most recently acquired fields for which Senergy valuation reports have yet to be released and 3) GSS’s legacy precision machining business. 

We choose to use our own NPV valuation for #1 and #2, and value GSS’s legacy business on 5x 2015E PER. This results in a valuation of US$191m for GSS, which equates to S$0.51 per share.
 

Upside to our valuation could come from the acquisition of new fields for drilling, the release of Senergy valuation reports for GSS’s most recently acquired Kawengan, Trembul, and Gabus fields, and value unlocking of GSS’s legacy machining business through a sale.
 

You may also be interested in:


You have no rights to post comments

Counter NameLastChange
AEM Holdings1.8600.020
Best World2.5000.020
Boustead Singapore0.950-
Broadway Ind0.1480.003
China Aviation Oil (S)0.8700.005
China Sunsine0.4000.010
ComfortDelGro1.380-0.010
Delfi Limited0.875-
Food Empire1.110-0.010
Fortress Minerals0.295-0.015
Geo Energy Res0.3050.005
Hong Leong Finance2.4400.020
Hongkong Land (USD)3.5000.080
InnoTek0.5100.005
ISDN Holdings0.3050.005
ISOTeam0.0500.003
IX Biopharma0.0400.001
KSH Holdings0.2500.005
Leader Env0.049-
Ley Choon0.054-0.001
Marco Polo Marine0.067-0.001
Mermaid Maritime0.1380.003
Nordic Group0.305-
Oxley Holdings0.087-0.003
REX International0.1260.002
Riverstone0.930-
Southern Alliance Mining0.4850.005
Straco Corp.0.480-0.010
Sunpower Group0.220-0.010
The Trendlines0.063-
Totm Technologies0.0200.001
Uni-Asia Group0.810-
Wilmar Intl3.130-0.030
Yangzijiang Shipbldg1.740-0.010
 

We have 792 guests and no members online

rss_2 NextInsight - Latest News