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Asia’s leading multi-asset exchange

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Equity Bottom-Up

Rex International Holding / Equity Bottom-Up

<p><i><b>These equity research reports are not written by the SGX.</b> SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.</i></p><div>
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<p>COMPANY UPDATE</p>
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<h2>Rex International Holding (REXI SP)</h2>
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<h3>Expect Significant Cash Flow For 2H20 And Multiple Catalysts</h3>
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<p><strong>Rex has been awarded a DOC in Oman, extending its concession period by 20 years. Oman is generating cash flow and we expect cash flow of around US$20m for 2H20 and US$40m for 2021. We raise our SOTP-based target price to S$0.30, after increasing our DCF forecast period. Key catalysts are the release of an updated Qualified Person’s Report, potential dividend policy, and being upgraded into the Mainboard. Rex trades at an undemanding 4.5x 2020F net cash flow. Maintain BUY.</strong></p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/151/443/original/image_4983336131596935611891.png?1596935615" class="editor-image img-responsive" data-smartkarma-image-id="151443"></figure>
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<p>WHAT’S NEW</p>
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<p>• <strong>Awarded declaration of commerciality (DOC) in Oman</strong>. Following the successful test production of the Yumna 1 well (Yumna), the Ministry of Oil and Gas in Oman has awarded a DOC to Rex and approved the Field Development plan for Yumna Field. This is significant as Rex can now fully develop Yumna while continuing to explore the rest of Block 50 Oman. Also, the concession period has been extended by 20 years. According to a Qualified Person’s Report done by oil services company AkerGeo in 2011, the prospective resources found in Yumna could only represent 0.5% of the total prospective resources in Block 50 Oman.</p>
<p>• <strong>Yumna production expected to contribute significant cash flow for 2H20</strong>. Having already produced more than 1m barrels of oil in 2020 ytd, Yumna is currently producing over 8,000 bbl/day through a one-inch choke. Rex has also released the drilling rig from Yumna and replaced it with a Mobile Offshore Production Unit (MOPU), which, together with an Aframax storage tanker, is expected to reduce production costs. Rex has already sold its first three cargoes of crude oil in Apr, May and Jun 20 and will continue to do so for 2H20. Assuming an all-in production cost of US$25/bbl, we expect Yumna to generate around US$20m cash flow for 2H20. Also, Rex is targeting to drill a second hole in Yumna in early-21 to further increase its production. Our oil price assumptions are US$35.00/bbl, US$40.00/bbl, US$42.00/bbl for 2020, 2021 and 2022 respectively.</p>
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These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.



COMPANY UPDATE




Rex International Holding (REXI SP)




Expect Significant Cash Flow For 2H20 And Multiple Catalysts





Rex has been awarded a DOC in Oman, extending its concession period by 20 years. Oman is generating cash flow and we expect cash flow of around US$20m for 2H20 and US$40m for 2021. We raise our SOTP-based target price to S$0.30, after increasing our DCF forecast period. Key catalysts are the release of an updated Qualified Person’s Report, potential dividend policy, and being upgraded into the Mainboard. Rex trades at an undemanding 4.5x 2020F net cash flow. Maintain BUY.





WHAT’S NEW




• Awarded declaration of commerciality (DOC) in Oman. Following the successful test production of the Yumna 1 well (Yumna), the Ministry of Oil and Gas in Oman has awarded a DOC to Rex and approved the Field Development plan for Yumna Field. This is significant as Rex can now fully develop Yumna while continuing to explore the rest of Block 50 Oman. Also, the concession period has been extended by 20 years. According to a Qualified Person’s Report done by oil services company AkerGeo in 2011, the prospective resources found in Yumna could only represent 0.5% of the total prospective resources in Block 50 Oman.
• Yumna production expected to contribute significant cash flow for 2H20. Having already produced more than 1m barrels of oil in 2020 ytd, Yumna is currently producing over 8,000 bbl/day through a one-inch choke. Rex has also released the drilling rig from Yumna and replaced it with a Mobile Offshore Production Unit (MOPU), which, together with an Aframax storage tanker, is expected to reduce production costs. Rex has already sold its first three cargoes of crude oil in Apr, May and Jun 20 and will continue to do so for 2H20. Assuming an all-in production cost of US$25/bbl, we expect Yumna to generate around US$20m cash flow for 2H20. Also, Rex is targeting to drill a second hole in Yumna in early-21 to further increase its production. Our oil price assumptions are US$35.00/bbl, US$40.00/bbl, US$42.00/bbl for 2020, 2021 and 2022 respectively.

























Non-SGX Report: Rex International Holding (REXI SP): Expect Significant Cash Flow For 2H20 And Multiple Catalysts