Tuesday, September 24, 2013

Rex International : Game changer in the making (DBSV)

Rex International Holding;
BUY (Initiating Coverage) S$0.85; B
Game changer in the making;
Price Target : 12-Month S$ 1.27;

•Independent E&P player armed with potentially revolutionary exploration technology
•First mover advantage in “seeing” oil gives it a head start in cherry picking attractive licences
•Potential multi-bagger as it buys assets cheap and spins off successful discoveries
•Initiate with BUY and S$1.27 TP; catalysts to come from licence adds, oil hits

More than your average independent oil & gas E&P company. Rex International Holding (RIH) will have access to proprietary oil & gas exploration technologies, including Rex Virtual Drilling (VD), which uses resonance frequency theory to
identify and characterise reservoirs in the areas to be drilled, thereby substantially lowering the chances of hitting a dry well. RIH is positioned to capture the highest value in the E&P value chain through successful discoveries and limiting capex requirements in expensive offshore areas. We estimate that the use of Rex VD could yield success rates in excess of 50%, compared to global average of around 15% using traditional methods, thus potentially boosting project ROIs to >100%.

Diversified asset portfolio provides strong growth platform.  The Group currently has stakes in 15 concession areas in mature oil & gas development areas - the USA, Caribbean, Norway, Oman and UAE - with plans to expand the portfolio further. The trust from partners and governments demonstrates the credibility of the technology, which has recently been further enhanced by validation from Norwegian partner North Energy, who reported an 85% success rate in using Rex VD to predict drilling results in 41 prospects over a 2 year timeframe.

Initiate with BUY, expect catalysts from continuous positive news flow. Based on a sum-of-the-parts valuation using conservative chances of success, we arrive at a TP of S$1.27 for RIH, which implies close to 50% upside at current levels. Over the next 2 years, we expect RIH to rapidly add on to its licence portfolio, while also delivering on its drilling programmes at various regions, with the first well results from Oman likely in early-2014.

Source/Extract/Excerpts/来源/转贴/摘录: DBSV-Research,
Publish date: 23/09/13

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