PublicInvest Research
HIBISCS - Realising The Value
PublicInvest
Publish date: Mon, 09 Jan 2017, 10:10 AM
PublicInvest
0 11,283
An official blog in I3investor to publish research reports provided by PublicInvest Research team.
All materials published here are prepared by Public Investment Bank Berhad. For latest offers on Public Invest trading products and news, please refer to: https://www.publicinvestbank.com.my/pbswecos/default.asp
PUBLIC INVESTMENT BANK BERHAD (20027-W)
9th Floor, Bangunan Public Bank
6, Jalan Sultan Sulaiman, 50000 Kuala Lumpur
T 603 2031 3011 | F 603 2272 3704 | Dealing Line 603 2260 6718
All materials published here are prepared by Public Investment Bank Berhad. For latest offers on Public Invest trading products and news, please refer to: https://www.publicinvestbank.com.my/pbswecos/default.asp
PUBLIC INVESTMENT BANK BERHAD (20027-W)
9th Floor, Bangunan Public Bank
6, Jalan Sultan Sulaiman, 50000 Kuala Lumpur
T 603 2031 3011 | F 603 2272 3704 | Dealing Line 603 2260 6718
Hibiscus Petroleum has come away from its special purpose acquisition company (SPAC) status to qualify as a O&G production and development company. We believe contributions delivered from its first producing field, the Anasuria Cluster in UK, has anchored its position more prominently amongst its oil peers. We are thus reviewing Hibiscus, premised on the undervaluation of its Anasuria Cluster asset valued at RM0.60 based on our DCF valuation with an 11.0% WACC. There is also further potential upside, with the conditional sale and purchase agreement (SPA) for the Group to acquire the 50% stake of the North Sabah Enhanced Oil Recovery (EOR) PSC, a partnership with Petronas Carigali which seems within reach, expected latest mid-2017. As a sweetener to the acquisition if successful, the deal structure will recognize contributions to the Group back-dated from 1 January 2017 onwards.
- Upside from core operations. We value Hibiscus? 50% stake in Anasuria Cluster at RM0.60 based on our DCF valuation with an 11.0% WACC. The Group currently owns and operates the field together with Ping Petroleum Limited. Our valuation has accounted for the decommissioning capex and various taxes.
- Potential upside boost. The conditional SPA with Sabah Shell Petroleum Company Limited and Shell Sabah Selatan Sdn Bhd to acquire a 50% participating interest in the 2011 North Sabah EOR PSC with Petronas Carigali for USD25m, comprising of 4 producing fields and all its associated equipment and assets including the Labuan Crude Oil Terminal is worth an estimated RM0.55. This assumes the production of its 2P remaining reserves of 62MMstb, no additional capex investment, OPEX cost of USD13.30/bbl through the remaining lifespan of the production rights (of 24years) up to 2040.
- Higher, stable oil price at about USD50/bbl levels enhances attractiveness. We see this holding up based on i) OPEC?s agreement to cap output at 32.5mbbl/sday, ii) President-elect Donald Trump?s energy independence vision to only take shape at a much later stage, iii) end of the prolonged oil price cycle which should see new operations coming online, otherwise a major depletion of 20% could be seen as soon as 2017 onwards with the supply crunch in 2019.
- Our base case fair value of RM0.60 is premised on a DCF valuation of Hibiscus? 50% stake in the Anasuria cluster with a 11.0% WACC. We are also positive on a further upside boost of an additional RM0.55 with the potential acquisition of the North Sabah asset. The total fair value of Hibiscus would therefore be RM1.15 if the acquisition is successful, pending approvals from Petronas. The base case scenario however of RM0.60 still offers a potential 37.1% upside from current share price.
INVESTMENT RISKS
Single income source. At this juncture, assuming Anasuria to be the bread and butter of Hibiscus for the longer-term. Any hiccups on this project would directly affect the Group?s performance.
Non-approval from Petronas for Shell?s 50% participating interest in the 2011 North Sabah EOR PSC. At this juncture, the acquisition is conditional to Petronas? approval. Assuming the non-approval, the Group?s fair value for the interim will remain at RM0.60.
Oil price levels. An inevitable event, oil price fluctuations is a determining factor to the Group?s performance.
FINANCIALS
The Group is currently in a net cash position, and is therefore able to gear up where needed for the future. As at 1QFY17 results, the Group has shown a boost in earnings from its deferred taxation. Stripping off the reversal of deferred taxation, the Group?s earnings would register a better net loss position of RM6.7m, which we are positive would continue in an upward trend as performance will be driven by the higher, current stable oil price levels, and with all expected one-offs to have been accounted for.
How is income derived? Revenue is accounted when oil or gas is lifted by the buyer (off take) at most commonly a spot price. Then energy royalty (if any) is deducted, followed by the lifting cost. At the EBITDA level, CAPEX, OPEX and all taxes are deducted before earnings are recognized.
Valuation – fair value of RM0.60. We value Hibiscus? 50% stake in Anasuria Cluster at RM0.60 based on our DCF valuation with an 11.0% WACC. The Group currently owns and operates the field together with Ping Petroleum Limited. Our valuation has accounted for the decommissioning capex and various taxes.
Decommissioning capex. As part of the Decommissioning Security Agreement (DSA), it is the Group?s obligation to dismantle and remove the facility, and to restore the site on which it is located. The estimated decommissioning cost and restoration of RM257m is discounted to its net present value. We understand that this amount is the discounted initial provision for decommissioning costs capitalised and amortised over the life of the Anasuria cluster fields on a unit of production basis over the proven and probably developed reserves.
Contingent consideration. We do note that there is a contingent consideration to the vendors, if oil price is above USD75/bbl, but only for between 2018-2021. The contingent consideration is 15cents per USD/bbl. Factoring in this consideration and with the assumption that oil price is at USD75/bbl from 2018 to 2035, Hibiscus? portion of the Anasuria Cluster is worth RM1.03 with the above assumptions remaining unchanged.
Taxation effects. We observe that as of 1QFY17, the Group?s taxation in its profit and loss statement included an RM75.8m deferred taxation which is the reversal of the deferred tax liabilities. This is following the adjustment of the fiscal terms of the UK North Sea Tax Regime in UK?s Finance Bill 2016, accounting for a downward revision of supplementary charge tax rate from 20% to 10%. Supplementary assessment shows the increase in value of an asset during the current tax year. This occurs where new infrastructure is completed or occupied during the current tax year. A Supplementary assessment is also calculated when a major renovation or addition is completed on an existing asset.
Source: PublicInvest Research - 9 Jan 2017
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Discussions
Be the first to like this. Showing 19 of 19 comments
This is con man stock.....
not to worry....still got legs.
but no one will alert you when time to run.
2017-01-09 21:00
Surprised? The oil is real, why do you say it's a con man stock?
https://www.petrofac.com/en-gb/media/news/petrofac-evolves-its-duty-holder-model-in-support-of-new-north-sea-investment/
This is a producing oil company bro. Who conned you?
2017-01-10 23:59
what big boys throw away, Hibiscus takes as gold.
I don't believe this kind of business model.
2017-01-11 00:05
stockmanmy, big boys throw away because their cost of running small fields like anasuria and north sabah is too high. example: they use very expensive systems i.e sap for small or big operations and that is why it is not economical anymore for them - post $100 per barrel. hibiscus are small outfit and thus they run things lean and mean, bringing cost really low per barrel and even @ $50 per barrel they can still make a handsome profit.
it is like having a bently with 3993cc engine (because this is what they use everywhere in the world) going to the market to buy 1 pint of milk while using a honda city which fits the job and can do the same or even better.
this company thrive in this environment, with high US$ which oil is sold using, it is a win-win situation. this is a good research paper and definitely not a con man stock.
2017-01-11 23:35
John Lu
I buy hibuscus like no tomorrow at 30.5 - 35 when u ask sell at 30.5...who is the idiot?? Haha
See my 2017 stock pick 11.7%...Calvin, you are no body to compare with me!!
11/01/2017 20:30
Haha!
Calvin has seen too many hot headed highminded people like nancytang and chrischan in ifca last time when ifca ballooned to rm1.87 and then crashed limit down 3 times below 50 cts later!
So this John Lu riding on a other balloon conman stock with fictitious earning will meet the same fate.
Just wait and see next quarter result for hibiscus.
Hmm?
Should I go and warn the fools in hibuscus again?
LISTEN LISTEN LISTEN!
Hibiscus earnings will collapse when next quarter result is out!
All who play here are in the game of greater fools.
See who will be the last sorchai who follow John Lu @ koonbee or con bilis into a trap!!
2017-01-11 23:39
Let's take a look at Hibiscus latest Quarterly Result:
Ha! It shows a 5.91 cents earning this quarter.
True or not?
Let's dig further.
It showed a Rm54.7 million in revenue.
But a profit of Rm80.2 million?
How come?
Revenue is only Rm54.7 million & can get a profit of Rm80.2 million? Looks fishy indeed!
Rm72.8 million is under "Taxation" refund or rebate or what? This is not from operating profit but accounting trick. A real con job stating this as "profit".
So Rm80.2 million - Rm72.8 million = Rm 7.4 million "profit"
Look again!
Ha! there is another Rm17.5 million from foreign currency gain!
So Rm7.4 million - Rm17.5 million = - Rm10.1 million loss this quarter from actual company operation!!
OH BOY! ANOTHER BIG CON JOB HERE!!
So stripping off "illusory taxation gain" & foreign exchange gain which are one off the actual loss this quarter is Rm10.1 Million!
SURPRISE! THERE IS AN OPERATING LOSS OF 0.74 CENT THIS QUARTER FOR CONMAN HIBISCUS!!
2017-01-11 23:59
Don't believe? Still not convinced?
Let us investigate further then
Now let's scroll down to CASH FLOW ACCOUNTS
Net cash generated from financing activities.............................................................................Rm16.420,000
Net decrease in cash and cash equivalents..................................................................................(12,303,000)
Effects of foreign exchange rate changes........................................................................................... 671,000
Cash and cash equivalents at beginning of the financial quarter ...................................................28,746 ,000
Cash and cash equivalents at end of the financial quarter............................................................. 17,114,000
Can you SEE that there IS AN ACTUAL DECREASE IN CASH OF (12,303,000) + gain from foreign exchange of Rm671K
So the NET LOSS OF CASH IS RM11,632,000?
RM11.6 MILLION CASH WIPED OFF THIS QUARTER!
And where did extra monies come from. From endless private placements that kept diluting value like another conman KNM?
2017-01-12 00:00
Posted by John Lu > Jan 11, 2017 11:57 PM | Report Abuse X
Calvin 1.9%
John Lu 11.7%
Result speak everything...haha
2017-01-12 00:00
Posted by 8wpwtmt8 > Jan 12, 2017 12:20 AM | Report Abuse
Foolish Calvin Tan, if Hibiscus is so bad, how can it goes up 20 sen from RM0.30 to RM0.50.
Calvin replies:
Ifca gone up from 7 cts to Rm1.87
Then went TRIPLE LIMIT DOWN!!
It crashed to below 30 cts!!
Better wake up!!
2017-01-12 00:25
Posted by John Lu > Jan 12, 2017 12:25 AM | Report Abuse X
Those who follow calvin call to sell at 30.5c already loss 20c or 65% in 4 weeks
Imagine if u have 100 lots hibiscus at 30.5 c
30.5 x 100 lots = 30.5k
And u sell to buy DRB at 1.24 (follow calvin call)
You hv 24.5 lots DRB × 1.17 = 28.7k now
If u follow my call to keep hibiscus, your 100 lots = 50c x 100 = 50k now
With same capital of 30k
U follow john Lu now u have 50k
U follow Calvin now you have 28.7k
Who is the loser?? Calvin holland kin
2017-01-12 00:26
Posted by John Lu > Jan 12, 2017 12:42 AM | Report Abuse X
breaking news from Iskandar Johor Buddy
Posted by John Lu > Jan 12, 2017 12:25 AM | Report Abuse X
Those who follow calvin call to sell hibiscus at 30.5c already loss 20c or 65% in 4 weeks
Imagine if u have 100 lots hibiscus at 30.5 c
30.5 x 100 lots = 30.5k
And u sell to buy DRB at 1.24 (follow calvin call)
You hv 24.5 lots DRB × 1.17 = 28.7k now
If u follow my call to keep hibiscus, your 100 lots = 50c x 100 = 50k now
With same capital of 30k
U follow john Lu now u have 50k
U follow Calvin now you have 28.7k
Who is the loser?? Calvin holland king
2017-01-12 01:27
Haha!
Calvin has seen too many hot headed highminded people like nancytang and chrischan in ifca last time when ifca ballooned to rm1.87 and then crashed limit down 3 times below 50 cts later!
So this John Lu riding on a other balloon conman stock with fictitious earning will meet the same fate.
Just wait and see next quarter result for hibiscus.
Hmm?
Should I go and warn the fools in hibuscus again?
2017-01-12 01:27
Calvin 12 months ago ask sell comcorp but comcorp still above 80c today...how?? Low life Calvin no credibility at all...now ask sell hibiscus?? Go hell
2017-01-12 01:30
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CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
chongmeng
MIDF value Hibiscus at RM0.40 per share based on the value
http://www.bursamarketplace.com/index.php?ch=26&pg=93&ac=29080&bb=research_article_pdf
2017-01-09 11:16