Ramba

Ramba: Extended negotiations with Risco Energy Investments (REI) up to 31 Jan 2015. Recall, Ramba entered into a binding agreement with REI in Sep 2014, to transfer 25% working interest in the Lemang production sharing contract for up to US$157.5m ($201m). Although details provided on the three-month exclusive agreement are scant, we hypothesize that Ramba's agreement with a reputable investment company can be viewed as a key marker for investors who have endured the wild share price gyrations of the upstream E&P company over the past year. REI is an upstream energy investment company, with a focus in South East Asia, which seeks low risk production assets that can be immediately recapitalised and restructured for rapid growth. First, if a deal materialises, the cash consideration of $201m alone would account for more than Ramba's current market cap of $129m, not accounting for its other working interests (WI) in Jatirarangon (70% WI) and West Jambi (100% WI). Second, a pull-out on the deal by REI may signal as a red flag for investors, which may bring to question the production capability of Ramba's Lemang Block. Currently, Ramba holds a 51% working interest in the Lemang Block, located in South Sumatra, Indonesia, through PT Hexindo Gemilang Jaya, its local subsidiary. At $0.335, Ramba is valued at 2.1x P/B, compared to peers KrisEnergy (1.4x), Loyz Energy (0.4x), Interra Resources (0.7x) and Rex (1.5x).