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FLOWS
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Thursday, 3 July, 2014
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BUY
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UMW,
IHH, TENAGA
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SELL
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DAYANG, UEMS, GENM
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STOCK ALERT
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STOCK NAME
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DATE
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PRICE
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BUY/SELL
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TARGET PRICE
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SONA (5241)
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3/7/2014
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RM0.485
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Trading BUY
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RM0.60
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Stock plunged 22% since the announcement of the acquisition
of 40% Salamander Energy (Bualuang) Limited (“SEBG”). The last leg’s fall
from RM0.525 to RM0.48 (-8.6%) was due to the delay in the signing of the
S&P agreement. This delay is due to a minor technical reason of enabling
the auditors to prepare SEBG’s financial statements under the International
Financial Reporting Standards for the last 3 years. This should be read as
positive as it facilitates due diligence on SEBG & eliminates any
debatable liabilities, hence providing a fair valuation to the acquirer and
is a minimal risk event that the purchase will not go through. The delay is
only for an additional month (to 31/7/14) and to drop >8% on the
announcement is clearly a perceived fear that the deal may hit a snag. Hence,
investors should take advantage of this short term selling & extension
period to accumulate the stock in bulk at the current low levels as Sona’s
acquisition ( @ EV/boe = USD23.3) is cheaper than SKPetro’s purchase of
Newfield’s Malaysian O&G assets (@ EV/boe = USD24.9) & is fundamentally
beneficial to the company as illustrated below. The Gulf of Thailand opex/bbl
is low historically , ranging from USD15-20/bbl, but Thailand has a different
fiscal system where a tax, known as Special Remuneratory Benefit (SRB), is
charged on annual petroleum profit exceeding a certain limit (lesser metres
drilled translates to higher tax charge ranging from 0-75% of annual profit).
Based on SEBG’s current production rate of 12,000 bbl/day on the Bualuang
B8/38 field and assuming oil price at USD100/bbl, opex of USD25/bbl, tax
charge of 35%, USD:MYR exchange rste of 3.20, loan interest rate of 8% p.a.
for the USD140m loan facility taken to part-finance the deal &
amortization of concession cost based on projected production volume, Sona’s
40% stake may generate 9.1sen for 2014 (PER 5.3x) . In addition, Sona’s CEO
has informed that the S&P agreement is structured in a way that allows
Sona to recognise the revenue & profit form 1/1/14 if the deal is
concluded by 4Q14, instead of from the S&P agreement date or the date of
approval from the authorities as is normally the case. Sona can also benefit
from an estimated 40m boe (Sona’s share) of prospective resources from G4/50
field of which Sona has paid USD30m and Salamander Energy PLC (parent of
SEBG) has agreed to carry Sona’s costs associated with the drilling of 2
exploration wells up to an agreed cap. Trading buy
(PT)
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CYPARK (5184)
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3/7/2014
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RM2.81
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ACCUMULATE
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RM3.20
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Cypark (RM2.81)
– reported a strong set of 2Q14 results with net profit +30% yoy and 77% qoq
from strong growth in its renewable energy & landscaping divisions.
Margins also improved from better economies of scale for its renewable energy
project. It is currently trading at attractive valuations with PER of
11.4x & 9.2x for FY14 & FY15 coupled with eps growth rates of
more than 30% for the next 2 FYs due to its renewable energy division which
has increased its export capacity to Tenaga by more than 3x in FY13/FY14, and
is expected to increase its capacity further in FY15. The Malaysian Government
Green Energy Policy plans to increase generation capacity from RE sources to
5-6% of total generation capacity by 2015 from 2% currently. Cypark has
comparable advantage to secure additional RE quota for future
growth because of its track record and first-mover advantage. Its
p/bk of 1.9x also compares favourably against its historical average of
2.5x. The current consolidation is an opportunity to accumulate the stock.
(PT)
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Calls for JUNE WEEK 3/ WEEK 4 2014
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STOCK
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Initiation Dates
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Initiation price
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BUY/SELL
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TARGET PRICE
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LAST PRICE
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% Change
since Initiated
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ARMADA (5210)
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26/6/2014
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RM3.52
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ACCUMULATE
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RM4.03
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RM3.37
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-4.3%
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KULIM (2003)
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26/6/2014
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RM3.46
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TRADING BUY
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RM3.98
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RM3.42
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-1.2%
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KOSSAN (7153)
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27/6/2014
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RM3.69
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ACCUMULATE
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RM4.86
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RM3.79
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+2.9%
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PRTASCO(5070)
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27/6/2014
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RM1.97
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ACCUMULATE
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RM2.58
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RM1.94
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-1.6%
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SCIB (9237)
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30/6/2014
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RM0.665
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ACCUMULATE
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RM0.80
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RM0.685
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+3.0%
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AIRASIA (5099)
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30/6/2014
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RM2.30
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BUY
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RM3.10
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RM2.30
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0.0%
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TDM (2054)
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1/7/2014
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RM1.04
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ACCUMULATE
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RM1.20
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RM1.06
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+1.9%
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MHB (5186)
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1/7/2014
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RM3.72
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BUY
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RM4.10
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RM3.71
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-0.3%
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MUDAJYA (5085)
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2/7/2014
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RM2.51
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BUY
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RM2.85
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RM2.51
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0.0%
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TAS (5149)
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2/7/2014
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RM1.50
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ACCUMULATE
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RM1.70
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RM1.49
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-0.7%
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Performance
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Positive
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Negative
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Neutral
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