Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

Rex International Holding / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/rex-international-holding" target="_blank" data-smartkarma-citation="entities:17074:1" rel="noopener">Rex International Holding (REXI SP)</a> has fallen back from 0.25 SGD last month to below 0.19 SGD recently. This is despite oil prices staying around 70 USD/bbl and Rex reporting fantastic 1H21 results.Rex also announced that after Oman and Norway it is studying to develop some oil fields in Malaysia. Rex is looking to diversify its production base so they are less dependent on one country. Cash is literally gushing in from its Oman assets and will accelerate in 2H21 as its Norwegian purchase of the Brage field will be accounted for in 2H.Rex's stock is up 29% YTD but remains deep value on an absolute basis and relative to peers such as <a href="https://www.smartkarma.com/entities/hibiscus-petroleum-bhd" target="_blank" data-smartkarma-citation="entities:20775:1" rel="noopener">Hibiscus Petroleum (HIBI MK)</a>. We continue to believe Rex will at least double from current levels as at some point the growing cash flows can no longer be ignored by investors. The eventual end-game has not changed: given the age of the principal shareholders, we believe Rex will see a lot of corporate activity going forward. We are unsure of the timeframe and shape/form this takes (spin-off, partial divestments, partial return of capital, one-off dividends, large share buybacks, 100% sale to different owners, etc).

Rex International Holding (REXI SP) has fallen back from 0.25 SGD last month to below 0.19 SGD recently. This is despite oil prices staying around 70 USD/bbl and Rex reporting fantastic 1H21 results.Rex also announced that after Oman and Norway it is studying to develop some oil fields in Malaysia. Rex is looking to diversify its production base so they are less dependent on one country. Cash is literally gushing in from its Oman assets and will accelerate in 2H21 as its Norwegian purchase of the Brage field will be accounted for in 2H.Rex's stock is up 29% YTD but remains deep value on an absolute basis and relative to peers such as Hibiscus Petroleum (HIBI MK). We continue to believe Rex will at least double from current levels as at some point the growing cash flows can no longer be ignored by investors. The eventual end-game has not changed: given the age of the principal shareholders, we believe Rex will see a lot of corporate activity going forward. We are unsure of the timeframe and shape/form this takes (spin-off, partial divestments, partial return of capital, one-off dividends, large share buybacks, 100% sale to different owners, etc).  

Rex: Oman + Norway + Malaysia Is the New Trifecta; Stock Trades at 1.5x 2021 Earnings

Earlier this week <a href="https://www.smartkarma.com/entities/rex-international-holding" target="_blank" data-smartkarma-citation="entities:17074:1" rel="noopener">Rex International Holding (REXI SP)</a><a href="https://links.sgx.com/FileOpen/20210616_RIH_PressRelease_LimeAcquiresProducingBrageField_Final.ashx?App=Announcement&amp;FileID=671402" target="_blank" rel="noopener">announced</a> that its 90% subsidiary Lime Petroleum would be acquiring a minority stake from <a href="https://www.smartkarma.com/entities/repsol-sa" target="_blank" data-smartkarma-citation="entities:21292:1" rel="noopener">Repsol SA (REP SM)</a> in the Norwegian Brage oil field. In contrast to the rest of Rex's Norwegian assets which are mainly exploration targets, the Brage oil field has been producing oil since 1993 and reached its peak production in 1998. Lime paid 42.6 million USD for a 33.84% stake in Brage (please note it has significant amount of deferred tax assets included here). Interestingly, the transaction has been backdated to start 1 January 2021 so accounting wise Rex will book the cash flows associated with Brage in its full year 2021 report. The 1H21 report was already going to show great cash flow production from its Yumna field in Oman. The just announced acquisition in Norway just adds to this for 2H21 once the deal closes in September. Risks to closing of the transaction is the successful placement of a 2.5 year 60M USD bond in Norway (expected interest rate 10%). Norwegian investors are very familiar with oil companies so we expect no issues in placing the debt.
Why was Rex able to buy such an asset from Repsol? The Spanish oil giant is clearly divesting marginal oil investments as earlier this month <a href="https://www.smartkarma.com/entities/hibiscus-petroleum-bhd" target="_blank" data-smartkarma-citation="entities:20775:1" rel="noopener">Hibiscus Petroleum (HIBI MK)</a> announced it bought Repsol's Vietnam and Malaysian assets for 212.5 million USD. We see this as a typical board room decision by Repsol to get rid of marginal fields and the price the assets are acquired for is less important.
Oil = The New Tobacco? While oil companies have been put in a bad light (see recent Shell and Exxon Mobil news) the reality is that oil consumption will be with us for decades to come and cuts in capex by the majors are likely to lead to higher oil prices. For non-ESG obsessed investors the oil industry reminds us of the tobacco industry 20 years ago. ESG agnostic investors could potentially make significant returns in the oil &amp; gas sector just like tobacco investors did between 1998 to 2018.
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/213/888/original/image?1624003554" class="editor-image img-responsive" data-smartkarma-image-id="213888"></figure>
Rex remains a great risk/reward story as cash flow from Oman ramps up in 1H21 and cash flow from Norway gets added in 2H21. As highlighted in our previous insight we think Rex currently trades anywhere between 1x to 2x pre-tax cash flows (depending on input variables such as oil price, days production, etc). The 1H21 results in mid-August 2021 should be a wake-up call to investors. Given the age of its principle shareholders Rex remains a prime M&amp;A candidate at some point.

Earlier this week Rex International Holding (REXI SP)announced that its 90% subsidiary Lime Petroleum would be acquiring a minority stake from Repsol SA (REP SM) in the Norwegian Brage oil field. In contrast to the rest of Rex's Norwegian assets which are mainly exploration targets, the Brage oil field has been producing oil since 1993 and reached its peak production in 1998. Lime paid 42.6 million USD for a 33.84% stake in Brage (please note it has significant amount of deferred tax assets included here). Interestingly, the transaction has been backdated to start 1 January 2021 so accounting wise Rex will book the cash flows associated with Brage in its full year 2021 report. The 1H21 report was already going to show great cash flow production from its Yumna field in Oman. The just announced acquisition in Norway just adds to this for 2H21 once the deal closes in September. Risks to closing of the transaction is the successful placement of a 2.5 year 60M USD bond in Norway (expected interest rate 10%). Norwegian investors are very familiar with oil companies so we expect no issues in placing the debt.
Why was Rex able to buy such an asset from Repsol? The Spanish oil giant is clearly divesting marginal oil investments as earlier this month Hibiscus Petroleum (HIBI MK) announced it bought Repsol's Vietnam and Malaysian assets for 212.5 million USD. We see this as a typical board room decision by Repsol to get rid of marginal fields and the price the assets are acquired for is less important.
Oil = The New Tobacco? While oil companies have been put in a bad light (see recent Shell and Exxon Mobil news) the reality is that oil consumption will be with us for decades to come and cuts in capex by the majors are likely to lead to higher oil prices. For non-ESG obsessed investors the oil industry reminds us of the tobacco industry 20 years ago. ESG agnostic investors could potentially make significant returns in the oil &amp; gas sector just like tobacco investors did between 1998 to 2018.

Rex remains a great risk/reward story as cash flow from Oman ramps up in 1H21 and cash flow from Norway gets added in 2H21. As highlighted in our previous insight we think Rex currently trades anywhere between 1x to 2x pre-tax cash flows (depending on input variables such as oil price, days production, etc). The 1H21 results in mid-August 2021 should be a wake-up call to investors. Given the age of its principle shareholders Rex remains a prime M&amp;A candidate at some point. 

Rex: Buying More Producing Assets in Norway, 1H21 Cash Flow Report to Be Transformational

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

MSCI Emerging Markets Index / Technical Analysis

This report highlights actionable themes across the EM universe, including: bullish inflections in the Russian and Thai markets, and a pullback opportunity in India's SENSEX.  We also highlight actionable setups in MSCI EM Energy and Materials sectors and within Taiwanese Financials/Banks.  Finally we uncover a number of attractive bottoms-up opportunities, sorted by sector and market-cap.

This report highlights actionable themes across the EM universe, including: bullish inflections in the Russian and Thai markets, and a pullback opportunity in India's SENSEX.  We also highlight actionable setups in MSCI EM Energy and Materials sectors and within Taiwanese Financials/Banks.  Finally we uncover a number of attractive bottoms-up opportunities, sorted by sector and market-cap.

EM Strategy: Russia and Thailand Bullishly Inflecting; Pullback Opportunity in India

In this report we provide a synopsis of EM markets. We also scour the EM universe for attractive and actionable opportunities, highlighting opportunities within India's SENSEX, global energy and materials sectors, and Asian banks.

In this report we provide a synopsis of EM markets. We also scour the EM universe for attractive and actionable opportunities, highlighting opportunities within India's SENSEX, global energy and materials sectors, and Asian banks.

Malaysia

Hibiscus Petroleum Berhad is an independent upstream exploration and production company that explores for oil and gas. The Company has operations in the Middle East, Norway and Oceania regions.

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Hibiscus Petroleum (HIBI MK)

Rex: Oman + Norway + Malaysia Is the New Trifecta; Stock Trades at 1.5x 2021 Earnings

Rex reported stellar 1H21 results and cash flow will accelerate significantly in 2H21. Rex trades at 1.5x FY21 PATMI which makes this an absolute...

Nicolas Van Broekhoven

Rex: Buying More Producing Assets in Norway, 1H21 Cash Flow Report to Be Transformational

Rex acquired Norwegian assets from Spanish oil giant Repsol. This adds to its production profile. The 1H21 results report mid-August should be a...

Nicolas Van Broekhoven

EM Strategy: Russia and Thailand Bullishly Inflecting; Pullback Opportunity in India

This report highlights actionable themes across the EM universe, including: bullish inflections in the Russian and Thai markets, and a pullback...

Vermilion Research

EM Strategy: Remain Overweight India

In this report we provide a synopsis of EM markets. We also scour the EM universe for attractive and actionable opportunities, highlighting...

Vermilion Research

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