Excerpts from analyst's report

SP Angel adjusts REX International's value to $1.10

Analyst:  Zac Phillips

The summer has been an active time for the Company. The sale of its interest in Innis Trinity in Trinidad has sharpened the focus, while the acquisition of Rex Technology simplifies the structure significantly.

The recent fundraising, where it raised ~$75mm, provides it with sufficient cash resources to execute its near to medium term strategy. 

 
manslidgren.8.13aMans Lidgren, CEO of Rex International.
NextInsight file photo.
Technology Ownership Simplifies the Offering
One of Rex’s key differentiating factors was its application of Rex Virtual Drilling (“RVD”) in the exploration phase, which it had exclusive access to, providing certain shareholder interests are maintained, etc.


Consequently, news of the acquisition of the technology simplifies this area significantly, and eliminates what hitherto has been an area of confusion for investors.
 
Fundraising Provides Balance Sheet Strength and Corporate Flexibility
The recent fundraising is timely (see below) and provides two things to the Company, namely:

(i) balance sheet strength, which given that the funding markets are not fully open, a dollar on the balance sheet is worth more than a dollar to third parties outside the Company; and 

(ii) corporate flexibility, whether it is in the shape of activity on their own acreage, or farming in to a third party’s acreage, it provides them with the ability to pick and choose, and be more aggressive in their pursuit of terms, which is good for shareholders.

Activity Increasing & More Focused
As we enter the closing stages of 2014, the drilling programme starts to accelerate, with the focal points (for us) being Norway and the Omani appraisal well. However, this is not the only activity, as there will be a significant amount of activity right across the portfolio, in all their jurisdictions.
 
Valuation – $1,095 m (S$1.10)
While RIH’s asset value has increased overall to $1,095mm, the per share valuation has been adjusted to S$1.10, which reflects the increased number of shares in issue. We are reiterating our BUY recommendation, but adjusting our target price to S$1.10.


Recent story:  REX target $1.27; VALUETRONICS attractive at 3.3X PE

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