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Background: KS Energy is a service provider to the oil and gas sector. It also distributes parts and components, charters capital equipment and provides drilling and rig management services.
Recent development: Pacific One, the holding company of Chairman Kris Wiluan, has purchased a further 7% stake in the company from Tael One Partners, an investment fund, raising its stake from 33% to 40%. Under SGX rules, Pacific One now must make a mandatory conditional cash offer for all the ordinary listed shares at the same purchase price of $1.07 per share. This is an 11% premium over its trading price prior to the purchase. If the offer results in acceptances of more than 50%, it becomes unconditional. A circular will be distributed in due course to the shareholders.
Key ratios…
Price-to-earnings: na
Price-to-NTA: 1.3x
Dividend per share / yield: 0 cts / na
Net debt per share: $0.56
Net debt as % of market cap: 53%
Share price S$1.06
Issued shares (m) 421.6
Market cap (S$m) 447.0
Free float (%) 40.5%
Recent fundraising Nil
Financial YE 31 December
Major shareholders Management - 40.4%
YTD change -1.85%
52-wk price range S$0.76 – 1.19
Our view:
To remain listed. If unconditional, Pacific One will also make a nominal offer for some 84.1m listed warrants at $0.001; these are way out of the money with conversion at $1.36. Pacific One intends to maintain the listing status of KS Energy. The other major strategic partners, Dubai Transport Company (12% stake) and Kim Seng Holdings (5.4% stake), are not expected to take up the offer.
Building up its asset base. Operationally, KS Energy is building up its asset base. It recently commissioned the construction of two drilling rigs worth US$388m through Le Tourneau to be built with Cosco Shipyard in China, with delivery in around 30 months. This will increase its fleet to 12 rigs (six offshore, six land).
Itochu invests in drilling division. Itochu Corp of Japan is taking up a 20% stake in KS Drilling, the company’s drilling division, for US$45-50m, subject to regulatory approvals. It is expected to expand KS Drilling’s customer scope and new businesses such as renewable energy projects.
Earnings show life. KS Energy’s share price has been on the slide since hitting $1.40 in April last year. It recorded a $98.4m loss last year due to lower revenues, provisions and impairments. In 1Q11 earnings did show some improvement, but still lost $8.3m on lower revenue despite better gross margins. In view of the earnings risk, investors may be keen to accept the exit offer at $1.07 per share.
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