ChanKitWhyePrior to his retirement, Chan Kit Whye (left) worked more than 30 years as Regional Finance Director, Financial Controller and Manager in a multinational specialty chemical business. He has played an active role in CPA (Australia) Singapore Branch, taking up positions in its Continuing Professional Development and Social Committees. Kit Whye is a Fellow of CPA Australia, CA of Institute of Singapore Chartered Accountants and CA of the Malaysian Institute of Accountants. He holds a BBus(Transport) Degree from RMIT, MAcc Degree from Charles Sturt University and MBA from Durham Business School.


Tiger Air made an announcement of good news and bad news.

Good news is that it will sublease its 12 unused aircraft to InterGlobe Aviation Limited (IndiGo) for between 3 and 4 years, which will improve its cash flow by about $45 million a year.

Bad news is that the company will take a $93 million one-off provision relating to these aircraft.

Another piece of bad news is that the company is "reviewing various funding options (including the possibility of a rights issue) to proactively strengthen its balance sheet and meet its general corporate funding requirements."

Overall, my view for this stock is still very bearish and negative... but how low can this share go?

tiger_airways_550Given the current overcapacity situation in the industry, TigerAir will sublease 12 aircraft to IndiGo at a discount to their original lease rates. However, compared to the idling of these 12 aircraft, this sublease agreement will significantly reduce the Group’s cash flow burden by about $162 million over the sublease periods. NextInsight file photo




Linc Energy:
 Genting Strategic exercised its option to purchase 10.75 million Linc Energy's shares at S$1.20 a share. That was last June 2014 when the price was $1.20. I wonder what is Genting going to do with the poor performance and results announced by Linc Energy.

The share has price dropped below 1.00 but that's purely a selldown by retail investors. This stock is now purely a technical play and lack sound fundamentals..

Yesterday's close at 0.96 with high volume signals a very bearish trend for this stock. Genting Strategic now is suffering a 20% loss or $2.58 million. I wonder what Genting is going to do about it. The loss is purely based on Genting's recent take up of the share option.

Genting initially took up 47.85 million shares of Linc Energy at 1.20 as a cornerstone investor.

Deep pockets aside, my belief is that a strategic investor must be managed by persons who has foresight, do the homework thoroughly and investigate into offers for strategic stake. After all, they are accountable to the stakeholders and must give a good explanation as to why the investment turn sour and what needs to be done to contain the setback. I don't trade. I am a long-term investor, that is why I place my concern here. 


Recent story: 
LINC ENERGY: Losses mount but someone's buying the stock!
 

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Comments  

#2 Lincisters 2014-10-21 13:03
A steal at current prices it would seem.
Kit Whye, any comeback from you or Genting?
+1 #1 Another view 2014-10-13 02:48
unfair for kit to say it lack fundmentals when he does not know about the oil industry.
How are Linc’s assets being carried on its Balance Sheet (BS) ?

Total Reportable Segment Assets (30-June-2014) = AUD 942.971 million = BV = Book Value
Consisting:
1) Oil & Gas (Conventional) = AUD 593.680 million (Proven reserves only)
2) Coal (Conventional) = AUD 43.986 million
3) Clean Energy (UCG) = AUD 96.714 million
4) Shale Oil (Sapex) = AUD 136.907 million
5) Corporate/Unallocated = AUD 71.684 million

Based on BV,
Total Equity (net of liabilities) = AUD 267.189 million or NAV = SGD 0.50 per share = BV

Market Value (MV) of Linc’s assets are above its BV : Possible Additions ABOVE BV:
1) Oil & Gas (Conventional) = 2P (PV 10) of Alaska (Umiat) = USD 2,465 million, if reserve could be proven up from 2P to 1P
2) Coal (Conventional) = Potential Sale Price – AUD 43.986 million
3) Clean Energy = ? The Directors’ believe that the recoverable amount of goodwill exceeds the carrying value.
4) Shale Oil (Sapex) = possible billion, depending on de-risking process or validation ?
5) Corporate Assets = AUD 155 million (Carmichael Royalty) – AUD 71.684 million

Carmichael Royalty (under corporate assets) had been sold for AUD 155 million or AUD 83.316 million above BV or SGD 0.157 per share above BV.

Assuming Linc’s conventional coal assets could be sold for another AUD 155 million or AUD 111.014 million above BV or SGD 0.208 per share above BV

NAV(1+3+4) + RNAV (2+5) = SGD ( 0.50 + 0.157 + 0.208 ) = SGD 0.865 per share (pretty close to current share price)

RNAV (1+3+4) potentially could be worth a lot more - pure speculation - part & parcel of E&P sector.

If 20% of 2P (PV10) of Alaska (Umiat) asset could be proven up to 1P reserve, it translates to 0.20 x USD 2,465 million or about SGD 1.00 per share 
 

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