Thursday, January 22, 2015

Giken Sakata

Giken Sakata: Counter is up 5.8% today to $0.275, after the company announced the appointment of Sakae Corporate Advisory, a unit of Sakae Holdings, to be its corporate adviser. The advisory firm believes in Giken’s growth potential, and intends to market the company to investors in Europe, America and other internationals investors. The move is expected to spearhead Giken’s corporate access and visibility to participants in the global capital markets, supported by Sakae’s newly-formed partnership with Religare Capital Markets- an Asia and India focused mid-market institutional equities and investment banking platform, empaneled with over 400 institutional investors. Market watchers are expecting a transformational year for Giken in 2015, after having acquired a 53.7%-stake in upstream O&G producer in Indonesia, Cepu Sakti Energy (CSE). Financial contribution from the new entity is expected to kick in from 1QFYAug15. Observers have cited that Giken’s market cap of $128m only prices in its stake in CSE’s two of five oil fields, which have 2P reserves and 2C resources of 7.6m barrels of oil equivalent (boe) and 3.8m boe, respectively. The remaining three fields are currently being commissioned for a qualified personnel report, anticipated to be released soon. Upside catalysts for Giken include higher-than-expected oil reserves (2P) for the three oil fields, further acquisition of new matured oil fields to scale production numbers and value unlocking of its legacy machining business. However, we caution investors that since the plunge in oil price from Jun ’14, a key risk would be the contracted selling price for oil that Giken has with Pertamina, as any downward adjustment would have a direct impact the company’s margins and bottom line.

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