Betting On Fallen

Latest news – Shares of Sapura Energy tumbled more than 9% in early Thursday trade following report that Tan Sri Mokhzani Mahathir is disposing off his entire stake in oil and gas services company. This is the second time Mokhzani is offloading its stake in an oil and gas firm. In 2015, Mokhzani’s private vehicle, Khasera Baru Sdn Bhd sold off a block of 190.3 million shares in SapuraKencana Petroleum Bhd for close to RM820mil in total.

Industry players said Mokhzani’s exit did not come as a surprise. They added that Mokhzani believed the oil and gas industry was a global issue and prefers to redeploy his resources in other investments. 

Mokhzani through Khasera Baru has a 10.10% stake in Sapura Energy. According to a term sheet, Mokhzani is looking to sell up to RM905.1mil of Sapura Energy shares. The bookbuilding range for the offer represents 605 million Sapura Energy shares was between RM1.42 and RM1.49 a share.

The price range represents an 8% to 12.3% discount to Sapura Energy’s closing price of RM1.62 on Wednesday ahead of the bookbuilding launch. Khasera Baru will not own any Sapura Energy shares after the sale. 
Read more at http://www.thestar.com.my/business/business-news/2017/11/02/sapura-energy-tumbles-9pc-in-early-trade/#zLhAuhfLVUKh4pbF.99

My 2-cent thoughts – I am not surprised that Tan Sri Mokhzani will make an exit due to current political friction. Without zooming into the company fundamentals, is Sapura Energy currently in an oversold position?

Sapura Energy has always been a close proxy to the Brent (USD) (as shown in the graph below – since 1 Jan 2014):

SAPE vs Brent _2 Nov 2017.png

A simple regression analysis shows that there is a strong statistical relationship between SAPE and Brent (USD). The current share price of SAPE of RM1.48 is relatively lower than forecast share price of RM2.35 and is even lower than the 95% confidence interval range of RM1.65 and RM3.04.

Forecast SAPE.png

Scenario Analysis

Based on the regression relationship, the following is a simple sensitivity analysis of the SAPE share price based on Brent (USD):

Sensivity Analysis.png

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Author: Ken Utau

Markets Observer + Food Lover

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