Rex International Holding

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

Equity Bottom-Up
996 Views, 20 Sep 2021 23:12
Nicolas has highlighted this Insight as a Top Pick
EXECUTIVE SUMMARY

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).  


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Nicolas Van Broekhoven
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CrossASEAN Research
SingaporeEquity Bottom-Up

Was on the buyside for 15 years, most recently at a medium-sized boutique asset management firm. I grew up in Europe, we... 

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