RH Petrogas

There is a mention of a placement of new shares at a min. of 36 cents in the article RH PETROGAS: Big moves and news to come

Why would any investor want to buy in the open market now at 44-48 cents (offer prices) when the placement shares would be priced lower?

He might as well go to Maybank or CLSA and place his orders during the book building period.

The 36 cts mentioned is just an example for illustrative purpose.

The official announcement was ".....at such price to be determined by the Board of RHP at its discretion which shall not be less than S$0.360 for each ordinary share. Through this fund raising exercise, RHP aims to raise about S$132 million."

credit to chan kit whye:

many will buy based on prospects, and basing on prospects is buying on hope. Buying on hope is not greed, because those buying on hope is based on some research reports plus the probability of realisation.

As for me, I look at the latest balance sheet and try to project what should be the intrinsic value of the stock using PE multiple as well as net tangible assets (NTA).

Firstly looking at the latest June H1 2013 numbers, a loss of US$4.3 million was reported, mainly due to impairment and write-offs of failed discovery.

Current share price is around 0.86.

In the balance sheet is a goodwill amount of US$139.87 million which I do not recognise as tangible assets. Its equity is US$177.67 million, which means that its NTA is only US$37.8 million.

Therefore, its current NTA per share is US$0.062 or S$0.077 a share, which translate to a price-to-book ratio of about 11 times, and 11 times is very high.

On average, P/B should be between 1.5 to 3 times at the most.

Its borrowings is US$50.5 million, giving a Debt/NTA of 134%.

The coming placement is at 0.63 a share, and after the placement, its number of shares outstanding will be increased to 730.28 million shares.

What can you predict for its earnings per share (EPS) in 2014 and 2015, using 730.28 million shares? 1 ct, 2 ct, 3 ct, 4 ct, 5 ct or more?

In DMG report, they forecast RH Petrogas earnings per share from US$0.01 to US$0.03 a share from 2014 to 2015.

That is between 1.25 cts to 3.75 cts Singapore a share.

For any business, a PE of 20x is very high, and a company that command such a high PE must have strong, sustainable profits, and paying reasonably and consistent good dividends.

RH Petrogas is not of that quality in my opinion.

Assuming that its share price maintain at 0.86 to work out its EPS at various PE.

At PE of 20x, an EPS of S$0.043 is required.

At PE of 15x, an EPS of S$0.057 is required. At PE of 10x, an EPS of S$0.086 is required.

What about share price of 0.63 (ie Placement price)? At PE of 20x, an EPS of S$0.0315 is required. At PE of 15x, an EPS of S$0.042 is required. At PE of 10x, an EPS of S$0.063 is required.

The Placement announcement states that its NAV will move up to US$0.3246 a share after the placement. That is about S$0.407 a share.

If we take S$0.19 a share goodwill off this number, its NTA is only S$0.219.

If a 4 cts EPS (on a best case scenario, and no dividend payout) is added to this, its NTA will be S$0.259 a share.

At current share price of 0.86, it price-to-book ratio is 3.32 times, which is still high.

Moreover, in DMG report, RH Petrogas free cash flow is still negative despite reducing its capex from US$70 million to US$50 million in the coming years.

I also note that the coming placement exercise is purely for the development of production at Salawati Basin, and RH Petrogas only has 33.2% working interest in Salawati, not 100%.

Finally, my comment is purely base on fundamentals, with prospective scenarios factor into the calculation.

Share price movement will never follow fundamentals all the time, but as a person who believes in fundamentals for investment purpose, I personally will hesitate to invest until I see a very clear picture of the prospects over the horizon.

Your thoughts may differ, but it is alright, and you may be right, as I am not always right every time.

0.640 -0.170 -20.988%

Sona Petroleum not taking stake in Singapore's RH Petrogas

BY TEE LIN SAY


PETALING JAYA: Contrary to earlier speculation, special-purpose acquisition company (SPAC) Sona Petroleum Bhd will not be taking up any stake in Singapore-listed RH Petrogas Ltd, sources said.

RH Petrogas is an oil and gas (O&G) company controlled by Sarawak tycoon Tan Sri Tiong Hiew King.

The sources said that Tiong, whose flagship company is the unlisted Rimbunan Hijau Group, was not too keen on diluting his interest in RH Petrogas.

“Sona is now in the midst of evaluating other assets. It has moved on from RH Petrogas,” they said.

Market speculation had been rife that Sona could be buying a stake in RH Petrogas via both a placement of shares, as well as acquiring some of its assets, mainly offshore O&G blocks.

Earlier reports had indicated that Sona was close to taking up a 10% share placement in RH Petrogas. This had sent RH Petrogas’ shares to new highs, doubling in the last month alone.

The counter rose from 51.5 Singapore cents (RM1.28) on Sept 16 to a peak of 92 cents on Oct 10, before sinking to 81 cents at Monday’s close.

www.thestar.com.my/Business/Business-New...-stake-in-RH-Pe.aspx

Analyst sticks by his call:


WOW RHP crashed 15% today. Heard it's profit-taking by traders to cover their losses in Blumont / Asiasons / Liongold. No fundamental reason for selling. I still have a BUY recommendation with a TP of S$1.33.