Public Invest Research expects Hibiscus Petroleum’s RM2bil fund-raising exercise to be dilutive close to medium-term, with sizable generation of income from its new portfolio asset likely from 2022 onwards.
In its research file issued on Thursday, it sees feasible upward modifications to manufacturing and offtakes, subsequently the capacity improvements to its discounted cashflow (DCF) valuations.
“That said, we maintain our earnings forecast and DCF-based TP of 65 sen for now, pending further details of potential asset acquisitions. Maintain Neutral, ” it said.
PIVB Research stated that overall, it likes the longer-term possibilities of the organization despite issues about the fund-elevating exercise.
The workout to elevate RM2bil will be through a private placement of convertible redeemable preference shares (CRPS) of up to 2 billion units.
A overall of billion CRPS can be issued at RM1 according to CRPS, subsequently RM2bil being raised in single or more than one tranches. The proposals are anticipated to be finished by the primary half of 2021.
With its new asset i.e. Marigold & Sunflower taking a while to kick-off and being capex-heavy, the contemporary running environment is more suitable for an funding into a producing asset which will concurrently generate desirable returns for the organization.
Recall, the organization obtained its Anasuria and North Sabah generating assets during the low oil fee environment.
Of the RM2bil, with RM1.9bil to be utilised in 24 months for a maximum of three acquisitions in good-value high-quality generating oil and gas assets in South East Asia.
The assets will need to have a payback duration of much less than 5 years and an inner rate of return of more than 12%.
“Earnings per share of the group will be diluted massively as a result of the issuance of the 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, ” it said.
