Ramba Energy

[Nick]

I am very surprised to see the Company buying back 4.619 million shares @ $0.51455 from open market today ! This is 2.32% of the outstanding share float. Share price is up 10% today with 37.9 million shares traded.

(Not Vested)

[rascallian]

DISCLAIMER: This is my personal opinion and done in good faith. Please do provide constructive feedback though!

COMPANY BACKGROUND
Ramba Energy Limited is a Singapore Stock Exchange-listed company engaged in oil and gas exploration and production in Indonesia. Ramba ventured into the energy sector in 2008 with the goal of becoming a significant energy producer in Indonesia. Now, shortly after embarking on this journey, the company has a growing portfolio of oil and natural gas assets in Indonesia and is already seeing the benefits of its actions.

Ramba’s assets are low-risk and low-cost; located in already-proven basins in South Sumatra (Lemang & West Jambi) and West Java (Jatirarangon), both regions with existing oil and gas production. The company's strategy is to continue to grow in Indonesia through the acquisition and development of low-risk, onshore assets.

Ramba’s logistics business unit, RichLand Logistics, provides supply chain services including inbound and outbound transportation activities, distribution management, seaport and airport cargo handling services, and chemical logistics distribution throughout the region. RichLand employs over 900 employees and has a fleet of over 400 trucks and more than 500 ISO-tanks. Headquartered in Singapore with assets strategically located in Indonesia, Ramba Energy is well-positioned to grow alongside both countries and become an energy producer for the future.


PRICE TARGET
Based on the mean expected value of the Lemang Block. Ramba could be valued at $0.965 (upside 105.32% from 4 March 2013 Closing of $0.470). Its high and low valuations range from S$0.587 to S$1.414 (upside 22.29% to 194.58%), depending on the size of the oil reserve in the Lemang block. See below for valuation break down.

This is a highly speculative bet on the commercial success of the Lemang Block. However, I believe that this is a good risk-reward trade given that Ramba has struck oil once in this block with its first drill of Selong-1, thus improving the odds of repeated success for its second drill, Akatara-1, in the same area. The results of the drilling of Akatara-1 is to be released by 26 March 2013. Do note however, that while a positive announcement is likely to result in a share price spike, the full value of the company may require several more drills to be recognized.

As always, do read this with a pinch of salt as this is my personal opinion and take caution with the size of your position.


RATIONALE
1. Undervalued based on value of assets, including oil resources worth an estimated US$193.6* in its Lemang Block alone. Drilling of its Selong-1 well struck oil in Dec 2012, resulting in the initial 60%+ spike in share price to a high of S$0.655. This significant event had increased the odds of finding commercially viable oil reserves in the Lemang Block and reduce the risk-premium attached to this speculative company.

"The Lemang Block covers 3,890 sq km in the Jambi sub-basin of Sumatra, just northwest
of the Jabung Block operated by PetroChina which is currently producing 135 mmscfd of
gas (Upstream Online, 13 October 2009) and 58,000 bopd (The Jakarta Post, 3 May
2010)."**

2. Fundamentally, it is an entirely different company from before, as it is has actually hit oil in its most prized block, Lemang. One reason for the fluctuation in share price over the years is that drilling in this block had been postponed several times. However, having completed its successful drill of Selong-1, the company is currently conducting analysis its second completed drill of the Akatara-1 well. From what I understand, it is hardest to hit oil on the first drill. Subsequent drills have a far high hit rate after having a successful point of reference, in this case, Selong-1.

"Detailing the company's plans for 2013, Ramba's Commercial Director and Executive Director Daniel Jol told Rigzone Nov. 9 that the Lemang PSC has the potential to significantly contribute to Indonesia's production target once the block's structures are successfully explored, appraised and developed." ***

3. Quietly increased its stake in Lemang from 41% to 51% some time in the last quarter of 2012, which I find very interesting. Although there were no official announcements nor details in the recent annual report, the change can be noticed in announcements made in Oct and Dec 2012 regarding the block. This is likely due to increased stake in its affiliate, Hexindo, which has stakes in Lemang as well.

4. Strong owners and technical teams. A friend's friend, a Masters degree holder in Geology and a seasoned industry expert himself, explained that Ramba's technical team are very knowledgeable and well known in the drilling world. Further, an equity dealer from Indonesia shared with me that Ramba's significant share holder, the Soeryadjaya family, is a very reliable and strong Indonesian family who looks after the interest of shareholders. The family has stakes in Ramba Energy through Redmount Holdings. The family's most prominent figure is Edwin Soeryadjaya, one of Indonesia's richest men, who is well known for having founded the conglomerate, Astra International.

5. Visible Time-Frame is available as the company is currently analyzing the results of its second drill, Akatara-1, which was completed just this weekend. Analysis of works at Akatara-1, should be completed within the next 25 days, as guided by management.

*DeGoyler and MacNaughton (D&M) independent report 25 July 2011. Note that the report is based on Ramba Energy's 41% stake in the block. Ramba Energy's latest stake in the block stands at an increased 51%.
**SIAS report 21 Aug 2012.
***http://www.rigzone.com/news/article.asp?a_id=122059


RISKS
1. Key near-term risk - Possible SGX watchlist as the company has just reported 3 consecutive years of losses. This would obviously hurt near term sentiments and also possible unloading of shares should brokerages cease margin financing on the name. However, that would be irrelevant to the purpose of this trade as I would expect them to be back in the black if the Lemang block is commercially viable and as successful as touted.

2. Dip in energy prices will affect the demand and in return, profitability of its oil and gas reserves. Oil prices have come off by approximately 10% in the last one month, which could explain part of Ramba's weak performance as its has corrected by over 20% in the same period. In the near term, crude oil prices are likely to remain under pressure as US budget cuts remain pensive.

3. Execution risks such as delays may slow down the recognition of the company's possible value. This was experienced in previous years, but this risk has been reduced following the momentum in drilling works in the Lemang Block.

4. Exploration risks including smaller or even no reserves being found. Though this risk would be gradually mitigated as the company unveils the outcome of its drills.

5. Further shareholder dilution via rights issue or placement.

6. Little coverage by analysts, resulting in difficulty in getting up to date valuation figures and in generating investor interest.


VALUATION
(i) Current Market Pricing of Ramba Energy
4 March 2013 Closing: S$0.47
Shares Outstanding: 336.7m (post-rights issue)
Current Market Value of Ramba Energy: S$158.25m (Based on S$0.470/sh)

(ii) Valuation Without Lemang Block*
Jatirarangon Field (70%): S$16.29m
West Jambi Block (51%): S$15.00m
Core Business (Richland): S$44.93m
Net Debt: S$2.08m**
Total Value of Ramba Energy excluding Lemang Block: S$83.89m (S$0.249/sh)

(iii) Valuation of Lemang Block***
Based on 41% Ownership:
Range of Market Value of Lemang Block: S$91.5m to S$318.2m ($0.272/sh to $0.945/sh)
Mean Market Value of Lemang Block: S$193.7m ($0.575)

Based on 51% Ownership:
Range of Market Value of Lemang Block: S$113.8m to S$392.1m ($0.338/sh to $1.165/sh)
Mean Market Value of Lemang Block: S$240.94m ($0.716/sh)

(ii + iii) Total Valuation of Ramba Energy (Based on 51% Ownership of Lemang)
Range of Market Value & Upside: S$0.587 to S$1.414 (24.89% to 200.85%)
Mean Market Value & Upside: S$0.965 (105.32%)

*SIAS report 21 Aug 2012. Note that SIAS includes Corridor TAC and Other Concessions in its valuations, which I have left out due to its ambiguity, Valuations methods of its Core Business is also not available.
**Based on FY12 Annual Report.
***DeGoyler and MacNaughton (D&M) independent report 25 July 2011. Note that the report is based on Ramba Energy's 41% stake in the block. Ramba Energy's latest stake in the block stands at an increased 51%. Also, this takes into account only 10 of 27 prospects in the block.

[rogerwilco]

Further, an equity dealer from Indonesia shared with me that Ramba's significant share holder, the Soeryadjaya family, is a very reliable and strong Indonesian family who looks after the interest of shareholders. The family has stakes in Ramba Energy through Redmount Holdings. The family's most prominent figure is Edwin Soeryadjaya, one of Indonesia's richest men, who is well known for having founded the conglomerate, Astra International.

Slight correction:
Astra International (now majority owned by Jardine Cyle and Carriage, part of Jardine Matheson Group) is founded by William Soerjadjaya (Tjia Kian Liong), together with his brother Tjia Kian Tie and his friend Liem Peng Hong.

William has two sons (Edward and Edwin) and two daughters (Joyce and Judith).

Ramba CEO (David Aditya Seky Soeryadjaya) is Edward's son so he is William's grandson.

As far as i know, Edwin does not have shares in Ramba.

Source
(in English):
http://en.wikipedia.org/wiki/Astra_International
http://en.wikipedia.org/wiki/William_Soeryadjaya

(in Indonesian, more complete):
http://id.wikipedia.org/wiki/William_Soerjadjaja
http://id.wikipedia.org/wiki/Edwin_Soeryadjaya

[rascallian]

Yup youre right, but heres more insight into Ramba Energy and how Edward is some what tied to it.

Ramba's core asset is its 51% stake in the Lemang PSC Block. The other 49% stake is held by Sugih Energy, which is listed in Indonesia. Sugih has stakes in two blocks, Lemang and Kalyani, of which Lemang seems to be in the more advanced stage of exploration and production. The Lemang block also seems to have greater prospects than its Kalyani PSC, give the emphasis Sugih has placed on Lemang. Refer to appendix for corporate structure.

Drawing your attention to its price chart, the counter has climbed from Rp100 to Rp420 (up another 12% just today) over the last five months. The uptick seemed to have coincided with the commencement of drilling in the Lemang PSC in late October 2012.

In an indication of the fundamental value of Sugih and in-turn, Lemang, Ortus Holdings Ltd, an investment company owned by Edward Seky Soeryadjaya increased its stake in Sugih:

"28 Feb 2013: Investment company, Ortus Holdings Ltd, will buy 16 percent stake in PT Sugih Energy Tbk from Goldenhill Energy Fund.

“We’ve signed` Conditional Sales and Purchase Agreement ‘Sugih Energy to buy a stake of approximately 16 percent of Goldenhill Energy Fund at a price of Rp350 per share, closing “ plan before 30 April 2013, “said Business Development Director Ortus Holdings, Banyu Biru Djarot, in a press release here on Thursday.

He suggested referring to an exercise price of Rp350 per share, the Ortus to spend up to Rp1, 46 trillion to redeem 3.95 billion (16 percent) of additional ownership in Sugih Energy. Total shares outstanding at the moment is as much Sugi 24.677 billion shares.

“In the future, the number of shares accumulated as much as 25 percent of the shares of PT Sugih Energy, Ortus aims to add investment in oil and gas sector, because we felt the Ministry of Energy and Mineral Resources now has a good performance,” he said.

Ortus Holdings is an investment company incorporated under the laws of the British Virgin Island. The company is also rumored to be a major investor in the project of mass transportation, Jakarta Monorail which is expected to cost a total investment of Rp 6, 7 trillion."

Source: http://kankakeerivervalley.com/?p=92 (There are various other news sources, but this one happens to be in English)

In my opinion, this is certainly tied to positive news regarding the Lemang Block, which both Ramba Energy and Sugih has stakes in and in which the Soeryadjaya family have indirect stakes in. The fact that the family is willing to more than double its stake in Sugih at Rp350 should provide a good indicator of the value of the Lemang Block.

[2V.]

Extracted from SGX, past 3 years performance...

Name of Issuer: RAMBA ENERGY LIMITED hereby gives notice that:

(i) it has recorded pre-tax losses for the three (3) most recently completed consecutive financial years (based on the latest announced full year consolidated accounts, excluding exceptional or non-recurrent income and extraordinary items); and

(ii) its market capitalisation as at 01-03-2013, the last market day on which trading was not suspended or halted, is S$169,471,108.
(Trading is deemed to be suspended or halted if trading is ceased for a full market day.)


The Company wishes to draw investors’ attention to Rule 1311 of the Listing Manual which states that the Exchange will place an issuer on a watch-list if it records:

(i) pre-tax losses for the three (3) most recently completed consecutive financial years (based on the latest announced full year consolidated accounts, excluding exceptional or non-recurrent income and extraordinary items); and

(ii) an average daily market capitalisation of less than $40 million over the last 120 market days on which trading was not suspended or halted. For the purpose of this rule, trading is deemed to be suspended or halted if trading is ceased for the full market day.

Investors should also note that pursuant to Practice Note 13.2 Paragraph 2.1, the Exchange conducts quarterly reviews to identify issuers to be included on the watch-list. The quarterly review will take place on the first market day of March, June, September and December of each year. The Company will make an immediate announcement should it be notified by the Exchange that it will be placed on the watch-list.

Yup youre right, but heres more insight into Ramba Energy and how Edward is some what tied to it.

Ramba's core asset is its 51% stake in the Lemang PSC Block. The other 49% stake is held by Sugih Energy, which is listed in Indonesia. Sugih has stakes in two blocks, Lemang and Kalyani, of which Lemang seems to be in the more advanced stage of exploration and production. The Lemang block also seems to have greater prospects than its Kalyani PSC, give the emphasis Sugih has placed on Lemang. Refer to appendix for corporate structure.

Drawing your attention to its price chart, the counter has climbed from Rp100 to Rp420 (up another 12% just today) over the last five months. The uptick seemed to have coincided with the commencement of drilling in the Lemang PSC in late October 2012.

In an indication of the fundamental value of Sugih and in-turn, Lemang, Ortus Holdings Ltd, an investment company owned by Edward Seky Soeryadjaya increased its stake in Sugih:

"28 Feb 2013: Investment company, Ortus Holdings Ltd, will buy 16 percent stake in PT Sugih Energy Tbk from Goldenhill Energy Fund.

“We’ve signed` Conditional Sales and Purchase Agreement ‘Sugih Energy to buy a stake of approximately 16 percent of Goldenhill Energy Fund at a price of Rp350 per share, closing “ plan before 30 April 2013, “said Business Development Director Ortus Holdings, Banyu Biru Djarot, in a press release here on Thursday.

He suggested referring to an exercise price of Rp350 per share, the Ortus to spend up to Rp1, 46 trillion to redeem 3.95 billion (16 percent) of additional ownership in Sugih Energy. Total shares outstanding at the moment is as much Sugi 24.677 billion shares.

“In the future, the number of shares accumulated as much as 25 percent of the shares of PT Sugih Energy, Ortus aims to add investment in oil and gas sector, because we felt the Ministry of Energy and Mineral Resources now has a good performance,” he said.

Ortus Holdings is an investment company incorporated under the laws of the British Virgin Island. The company is also rumored to be a major investor in the project of mass transportation, Jakarta Monorail which is expected to cost a total investment of Rp 6, 7 trillion."

Source: http://kankakeerivervalley.com/?p=92 (There are various other news sources, but this one happens to be in English)

In my opinion, this is certainly tied to positive news regarding the Lemang Block, which both Ramba Energy and Sugih has stakes in and in which the Soeryadjaya family have indirect stakes in. The fact that the family is willing to more than double its stake in Sugih at Rp350 should provide a good indicator of the value of the Lemang Block.

[rascallian]

Yes, you are also right, 2V. As highlighted as the first risk in the initial post. And I've also highlighted that this is highly speculative. At the end of the day, I believe in risk-reward and in my opinion, that is what this trade is about.

Key thing to note is whether historical earnings is an appropriate methodology. As a small E&P company, I am not surprised that the company has been making losses even with its logistics arm. However, as also mentioned, the successful commercialization of the Lemang Block will be a fundamental game-changer for Ramba. I would not hold onto Ramba if Lemang turns out to be a failed venture, but considering that there is an increasingly clearer picture of its development, I'm willing to take some risk.

[rogerwilco]

rascallian, while William Soerjadjaya is a man of honor, Edward has a somewhat checkered past

From http://en.wikipedia.org/wiki/William_Soeryadjaya

(William) Soeryadjaya lost control of Astra in 1992, when he sold his family's controlling shares in order to rescue his son's (Edward Soeryadjaya) Summa Bank, which had suffered from a credit crisis and finally collapsed after he buy SinarMas Bank.

From http://m.inilah.com/read/detail/1915846/...oeryadjaya and Google Translate

The case of the bankruptcy of Bank Summa (1992), which makes Soeryadjaya family should lose Astra, a valuable lesson for him. The story of Bank Summa and Astra, it seems, not only just for Edwin historical records. Because of this case, it is said, the relationship Edwin and his brother Edward Soeryadjaya less harmonious. Understandably, when the Bank Summa managed and controlled by Edward. Because the bank management is not good, the whole family has to bear the risk Soeryadjaya

[specuvestor]

IIRC the angle for Ramba is that Petrochina or CNOOC has a productive block next to theirs

[greengiraffe]

http://www.businesstimes.com.sg/companie...-placement

Ramba Energy raising S$15m via placement
By
Chan Yi Wenyiwenc@sph.com.sg@ChanYiWenBT
21 Oct5:50 AM
Singapore

TO finance the exploration and production activities of its Indonesian oil and gas business, Singapore-listed Ramba Energy is placing out 37.5 million new ordinary shares at S$0.40 each to raise nearly S$15 million, the company announced on Monday.

Following approval