Sunday, July 28, 2013

Rex International

Rex International 

Download the Prospectus here


Offer Price: $0.50
Offer Size: 142.5m new shares
Public Tranche – 2.5m shares
Placement Tranche – 140m shares
NAV per share (post-IPO): $0.152
Historical PE: NA
Market Cap (post-IPO): S$488.3m
Open: 22 July 2013
Close: 29 July 2013 12pm
Trading: 31 July 2013 9.00 a.m. (on “ready” basis)


Rex International ("Rex" or "The Company") is an independent oil and gas exploration and production (E&P) company which utilizes proprietary exploration technologies that minimizes exploration risks and reduces exploration costs. Most of its concessions and licenses are in the exploration phase in diverse regions such as the Middle East, Norway and the USA. Use of the S$71.2m IPO proceeds will mostly fund its investments in new oil and gas opportunities, drilling in its Middle East and Norwegian concessions/licenses and general working capital. 

Rex International was incorporated in Singapore on 11 January 2013 and founded by Dr Karl Lidgren, Hans Lidgren (CEO) and Svein Kjellesvik. It is an independent oil and gas exploration and production (E&P) company with access to proprietary and innovative exploration technologies (Rex Technologies) that mitigates exploration risks and reduces costs of exploration.

Most of its concessions and/or licenses are in the exploration phase, meaning that the rewards are higher when discoveries of resources are made. Its concessions are in the Middle East, Norway and the USA. It co-operates with several partners in the development, management and operation of concessions and licenses.

What is Rex Technologies?




Financial Highlight


Use of IPO Proceeds


Competitive Strengths

Access to Rex Technologies. The group has successfully procured its concessions mainly from the use of Rex Technologies, which mitigates exploration risk by increasing the probability of discovery, thereby reducing the time and costs of exploration.

Concessions located in stable countries. Its concessions and/or licenses are located in Middle East, Norway and USA. As such, it has access to well-developed oil and gas infrastructures resulting in costs savings.

Smaller financial commitments. Its operations in Norway is supported by the Norwegian petroleum fiscal system with reimbursement of 78% of exploration expenses every year, regardless of success in finding oil. While in Middle East, its subsidiary, Lime, has raised around US$90m for exploration activities and its US concessions require minimal additional financial commitments because of its existing partnership.

Strong partnership with strategic partners. Its partnership with O&G players allows the group to source for new investment opportunities with funding contributed by its partners, thereby reducing its risk exposure. Its partners include Hibiscus (Malaysia’s first independent listed O&G E&P company), Fram (Norwegian company with mature assets onshore in the USA and Republic of Trinidad and Tobago), Loyz Energy (Singapore company also in E&P activities) and North Energy (Norwegian company with assets in the Norwegian Continental shelf).

Key Risks

Reliance on Rex Technology Management for use of proprietary technology. The group does not own the technologies themselves but is instead granted the right to use them from a separate company controlled by the founders. Should the group cease to be granted the rights to access the technologies, the group will have to fall back on traditional means of analyzing oil reserves.

Most of its concessions are in the exploration phase. The group’s properties are mostly in the exploration phase where the risks are highest since the oil resources that are discovered might not be feasible to be commercialized or in the worst case scenario, no discovery of oil 
is made.

Young company with no track record. The group only commenced operations in 2011 and only has two years of limited historical records for investors to evaluate its business. It is currently not profitable and will only turn around when it finds oil and subsequently either 1) sells off the assets to a third party 2) develops the resources with its partners until production.

Drop in oil demand. The O&G industry is dependent on the price of oil. Although demand is strong currently from the growth in non-OECD countries, should oil demand drop, it negatively affects the industry and thereby the group.

Peer Comparison

 My personal view

If you are thinking that Rex International is riding on the another
recent IPO, KrisEnergy's tail-wind to quickly list in the exchange,
then you are absolutely right on the nail. But if you believe that
the stock is expensive, given that it is still in a loss and it will only
be profitable or pay out dividends until it finds resources in its 
concessions via its drilling programs and subsequently either 
1) sells the assets to a third party or 2) develop the resources until
production, then you may be disappointed with its post-IPO 
performance. I am so glad to add 2 trading stocks into my close
watch within such a short time. If you still have not put KrisEnergy
into your watchlist, then please put it in together with Rex when it
debuts on this coming Wednesday.  

Given the wonderful performance of the recent IPO, I will still
give a "Show-Hand" and apply for Rex International public tranche.
It will only be a mere 2.5 millions of shares to be distributed but
it is a $2 worth betting on. If you are in a quick punt, then you can
sell the stock on debut day. On the other hand, if you are a investor,
then you may want to hold it for a while longer. In the stock market,
most stocks are trading on a future value with huge expectations
and hope implied on the stock, and Rex is one of the stocks that
I believe will enjoy a rich valuation ie the stock will go up in value lah. 

Sources: Rex International IPO Prospectus, NRA Capital IPO Watch
on Rex Internation, The Straits Times

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