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

<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 been trading up recently (+61% YTD) on the back of strong oil prices (consistently above 70 USD/bbl) and expectations that its 1H21 report in August will show shareholders the significant cash flow which is being produced from its Oman assets.The deal to buy some of Repsol's Norwegian assets (see previous insight) also increases optionality for Rex's management to create value for shareholders should the SGX listing continue to trade at depressed levels. Rex has successfully completed a 60M USD bond sale to finance the transaction effectively reducing risk for equity holders.Historically, Rex owned around a dozen exploration licenses in Norway but the Repsol transaction means they will now become a producer with corresponding cash flow. Once the transaction closes later this year that creates the option to consider an IPO of its Norwegian assets on the Oslo exchange in 2022/2023. Norwegian investors are very familiar with oil producers/exploration companies and might give Rex's 90% owned subsidiary Lime Petroleum a better valuation. Rex would then hold a stake in the Yumna field (Oman) and a certain percentage in publicly listed Lime Petroleum. The eventual end-game has not changed: given the age of the principle 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) but the latest Norway news increases the optionality for the better.

Rex International Holding (REXI SP) has been trading up recently (+61% YTD) on the back of strong oil prices (consistently above 70 USD/bbl) and expectations that its 1H21 report in August will show shareholders the significant cash flow which is being produced from its Oman assets.The deal to buy some of Repsol's Norwegian assets (see previous insight) also increases optionality for Rex's management to create value for shareholders should the SGX listing continue to trade at depressed levels. Rex has successfully completed a 60M USD bond sale to finance the transaction effectively reducing risk for equity holders.Historically, Rex owned around a dozen exploration licenses in Norway but the Repsol transaction means they will now become a producer with corresponding cash flow. Once the transaction closes later this year that creates the option to consider an IPO of its Norwegian assets on the Oslo exchange in 2022/2023. Norwegian investors are very familiar with oil producers/exploration companies and might give Rex's 90% owned subsidiary Lime Petroleum a better valuation. Rex would then hold a stake in the Yumna field (Oman) and a certain percentage in publicly listed Lime Petroleum. The eventual end-game has not changed: given the age of the principle 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) but the latest Norway news increases the optionality for the better. 

Rex: Norway Oil Deal Increases Optionality to Create Shareholder Value

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

<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 been a forgotten oil stock on the SGX. Last year we tried to highlight the opportunity to investors already <a href="https://www.smartkarma.com/insights/rex-int-from-virtual-drilling-tech-play-to-pumping-oil-in-oman-overlooked-bargain-m-a-candidate" target="_blank" data-smartkarma-citation="insights:41575" rel="noopener">Rex Int: From Virtual Drilling Tech Play to Pumping Oil in Oman; Overlooked Bargain + M&amp;A Candidate</a>.As we learned with our bullish drumbeat on <a href="https://www.smartkarma.com/entities/ug-healthcare-corp-ltd" target="_blank" data-smartkarma-citation="entities:254:1" rel="noopener">UG Healthcare (UGHC SP)</a> a few years ago sometimes Mr. Market can be a bit slow. Recall, we were bullish on UGHC all of 2018/2019 highlighting its massive undervaluation, and then... it went up 1,000%+ last year. Rex reminds us of UGHC in 2019. Rex is not guaranteed to go up 1,000% but it has a pathway there (think oil at 100 USD/bbl) and should AT LEAST double in 2021. This is a high conviction idea.Below the fold, we give the math of how increased production at its Yumna field in Oman should lead to massive cash flows and earnings from 1H21 onwards. Once market participants "get it" and see the cash gush in this has to lead to a re-rating. If Mr.Market remains asleep an industry player will almost certainly come to the table and acquire Rex outright. Given the age of the main shareholders, this is more a question of "when" rather than "if".

Rex International Holding (REXI SP) has been a forgotten oil stock on the SGX. Last year we tried to highlight the opportunity to investors already Rex Int: From Virtual Drilling Tech Play to Pumping Oil in Oman; Overlooked Bargain + M&amp;A Candidate.As we learned with our bullish drumbeat on UG Healthcare (UGHC SP) a few years ago sometimes Mr. Market can be a bit slow. Recall, we were bullish on UGHC all of 2018/2019 highlighting its massive undervaluation, and then... it went up 1,000%+ last year. Rex reminds us of UGHC in 2019. Rex is not guaranteed to go up 1,000% but it has a pathway there (think oil at 100 USD/bbl) and should AT LEAST double in 2021. This is a high conviction idea.Below the fold, we give the math of how increased production at its Yumna field in Oman should lead to massive cash flows and earnings from 1H21 onwards. Once market participants "get it" and see the cash gush in this has to lead to a re-rating. If Mr.Market remains asleep an industry player will almost certainly come to the table and acquire Rex outright. Given the age of the main shareholders, this is more a question of "when" rather than "if".

Rex: Oman Production Gaining Steam; Could It Really Trade at 1x 2021 Pre-Tax Profits?

<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> will celebrate its 7th year of being listed on the SGX this Friday. Rex IPO'd late July 2013 at 0.50 SGD and within three months of its listing peaked at 0.88 SGD. The downfall was epic as oil prices tumbled from 110 USD/bbl in 2013 to just 25 USD/bbl in 2016. Rex would finally bottom at 0.008 SGD per share in 3Q2018.The stock has recovered some of its losses but REX is still trading 60% lower than its IPO. Now, times may be changing and Mr. Market is sleeping.What has changed? Why Own Rex?Rex has brought its Yumna field offshore Oman in development and is producing oil. Ten days ago Rex has achieved a declaration of commerciality from the Oman government and even at 40 USD oil price cash flows could be 40M USD/year. Contrast this with an Enterprise Value of just 143M USD. This leaves the stock trading at just over 3x 2021 Cash Flow. Obviously, this remains a commodity play and price taker so if oil prices drop/rise this number would change.Short term catalysts: move to SGX mainboard once cash flows are evident, qualified person report to quantify volume of oil in Yumna field. Longer-term, given the average age of the principal shareholders involved, Rex is likely to end up in the hands of <a href="https://www.smartkarma.com/entities/eni-spa" target="_blank" data-smartkarma-citation="entities:21185:1" rel="noopener">Eni SpA (ENI IM)</a> or <a href="https://www.smartkarma.com/entities/total-sa-spon-adr" target="_blank" data-smartkarma-citation="entities:813:1" rel="noopener">Total Sa Spon Adr (TOT US)</a>. Both companies are already active in Oman. Its remaining Norway assets and Virtual Drilling technology are just gravy.Fair Value: Asset development in Oman and asset monetization in Norway gives Fair Value of at least 0.36 SGD/share, or 100% upside. This is based on 6x 2021 cash flow est. M&amp;A could significantly increase that value to acquirer given size of Block 50 in Oman. ADTV is well over 3M USD.Key risks are: drop in oil price below 25 USD which makes Oman project uneconomical. The downside is mitigated by a clean balance sheet (zero debt and +/-60M USD net cash) + M&amp;A potential.Key upside: cut in O&amp;G CapEx budgets creates a super spike in oil prices between 2022-2025. Recall, JP Morgan recently told its clients oil could spike to 190 USD by 2025. The principal owners are well into their 70's and will want to monetize their combined 45% ownership in Rex at some point.

Rex International Holding (REXI SP) will celebrate its 7th year of being listed on the SGX this Friday. Rex IPO'd late July 2013 at 0.50 SGD and within three months of its listing peaked at 0.88 SGD. The downfall was epic as oil prices tumbled from 110 USD/bbl in 2013 to just 25 USD/bbl in 2016. Rex would finally bottom at 0.008 SGD per share in 3Q2018.The stock has recovered some of its losses but REX is still trading 60% lower than its IPO. Now, times may be changing and Mr. Market is sleeping.What has changed? Why Own Rex?Rex has brought its Yumna field offshore Oman in development and is producing oil. Ten days ago Rex has achieved a declaration of commerciality from the Oman government and even at 40 USD oil price cash flows could be 40M USD/year. Contrast this with an Enterprise Value of just 143M USD. This leaves the stock trading at just over 3x 2021 Cash Flow. Obviously, this remains a commodity play and price taker so if oil prices drop/rise this number would change.Short term catalysts: move to SGX mainboard once cash flows are evident, qualified person report to quantify volume of oil in Yumna field. Longer-term, given the average age of the principal shareholders involved, Rex is likely to end up in the hands of Eni SpA (ENI IM) or Total Sa Spon Adr (TOT US). Both companies are already active in Oman. Its remaining Norway assets and Virtual Drilling technology are just gravy.Fair Value: Asset development in Oman and asset monetization in Norway gives Fair Value of at least 0.36 SGD/share, or 100% upside. This is based on 6x 2021 cash flow est. M&amp;A could significantly increase that value to acquirer given size of Block 50 in Oman. ADTV is well over 3M USD.Key risks are: drop in oil price below 25 USD which makes Oman project uneconomical. The downside is mitigated by a clean balance sheet (zero debt and +/-60M USD net cash) + M&amp;A potential.Key upside: cut in O&amp;G CapEx budgets creates a super spike in oil prices between 2022-2025. Recall, JP Morgan recently told its clients oil could spike to 190 USD by 2025. The principal owners are well into their 70's and will want to monetize their combined 45% ownership in Rex at some point.

Rex Int: From Virtual Drilling Tech Play to Pumping Oil in Oman; Overlooked Bargain + M&A Candidate

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

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

China Aviation Oil (Singapore) / Equity Bottom-Up

§ Singapore’s Energy Sector was the strongest of the stock sectors in September, with a 4.7% market capitalisation weighted total return. During the month, the price of oil gained 7.9% and the price of thermal coal gained 15.6%.§ The Energy Sector has been highly cyclical over the past 12 months, ranking as the best performing sector of the month for three of the last 12 months, and least performing sector for four of the last 12 months.§ The ten largest capitalised stocks of Singapore’s Energy…

§ Singapore’s Energy Sector was the strongest of the stock sectors in September, with a 4.7% market capitalisation weighted total return. During the month, the price of oil gained 7.9% and the price of thermal coal gained 15.6%.§ The Energy Sector has been highly cyclical over the past 12 months, ranking as the best performing sector of the month for three of the last 12 months, and least performing sector for four of the last 12 months.§ The ten largest capitalised stocks of Singapore’s Energy…

Energy Was the Strongest of the Sectors in September

Singapore

Rex International is a multinational oil exploration and production (E&P) company with interests in exploration and production licenses in Oman, Norway, and Benin. It also offers its proprietary Rex Virtual Drilling technology, a liquid hydrocarbon indicator. The company was founded in Singapore on January 11, 2013.

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Rex International (REXI SP)

Rex: Norway Oil Deal Increases Optionality to Create Shareholder Value

Rex's purchase of Norwegian assets increases the optionality of management to create shareholder value for shareholders. Expect the Rex re-rating...

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

Rex: Oman Production Gaining Steam; Could It Really Trade at 1x 2021 Pre-Tax Profits?

Rex is a misunderstood oil company trading on SGX. Our calculations show the stock could be trading at +/- 1x 2021 pre-tax profits. There is wild...

Nicolas Van Broekhoven

Rex Int: From Virtual Drilling Tech Play to Pumping Oil in Oman; Overlooked Bargain + M&A Candidate

Rex International Holding (REXI SP) will celebrate its 7th year of being listed on the SGX this Friday. Rex IPO'd late July 2013 at 0.50 SGD and...

Nicolas Van Broekhoven

Energy Was the Strongest of the Sectors in September

§ Singapore’s Energy Sector was the strongest of the stock sectors in September, with a 4.7% market capitalisation weighted total return. During...

Singapore Exchange Ltd (SGX)

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