THE funding exercise to raise an estimated RM2 bil by Hibiscus Petroleum Bhd is seen as a welcome move by PublicInvest Research, as it plays to the group’s strong growth.
“We welcome this move as it capitalises on the group’s strong growth trajectory as the probable acquisition of a new producing asset will boost its earnings immediately.”
With its new asset Marigold & Sunflower taking some time to kick off and being capex heavy, the current operating environment is more appropriate for an investment into a producing asset which will simultaneously generate good returns for the group,” said PublicInvest analyst Nurzulaikha Azali.
The analyst noted that the group had acquired its Anasuria and North Sabah producing assets during the low oil price environment as well.
The fund-raising exercise will see a total of 2 billion convertible redeemable preference shares (CRPS) issued at RM1 per share, which totals to RM2 bil in single or multiple tranches, with the proposals expected to be completed by the first half of 2021.
“The issuance of CRPS is expected to raise total gross proceeds of up to RM2 bil, with RM1.9 bil to be utilised within 24 months for a maximum of 3 acquisitions in good-value high-quality producing oil and gas assets in Southeast Asia. The assets will need to have a payback period of less than 5 years and an internal rate of return of more than 12%,” said Nurzulaikha.
Still, the analyst noted that the earnings per share of the group will be massively diluted as a result of the issuance of new Hibiscus shares upon the conversion of the CRPS.
“However, the impact is short-term and will be offset by the earnings accretion from the acquisition of new producing assets, expected from FY22 onwards.”
“For now however, it is too preliminary to gauge the effects given the lack of details of potential acquisitions,” said the analyst.
PublicInvest maintains a neutral call on Hibiscus, with a target price of 65 sen.
At the end of the trading day, Hibiscus’ shares were last done at 50.5 sen, down 5.5 sen, with 49.6 million shares traded. – Sep 10, 2020
