GSS Energy seeks to be valued as O&G play

GSS Energy seeks to be valued as O&G play

Kang Wan Chern
14/06/17, 08:57 am

This article appears in Issue 783 (June 12) of The Edge Singapore which is on sale now

(June 14): Sydney Yeung, CEO of GSS Energy, thinks investors are undervaluing the company’s oil and gas (O&G) business. Formerly a precision engineering company known as Giken Sakata, GSS now also has an onshore oil production business in Indonesia. Last year, it entered into an agreement with Indonesian state-owned oil company Pertamina to assist the latter in producing petroleum at the Trembul Operation Area for a period of 15 years. The 47.6 sq km area in Central Java is estimated to have approximately 24.3 million stock tank barrels of contingent resources at a depth of up to 800m. Stock tank barrels refer to the volume of oil after production at surface pressure and temperature.

GSS is entitled to 23.5% of the petroleum and 31.4% of the natural gas in the Trembul Operation Area after accounting for operating costs. Under the terms of the agreement, GSS will be able to recover all its operating costs. There is also no minimum level of production required. “We are now at the advanced stage of preparing for production and expect to commence drilling by 2H2017,” Yeung tells The Edge Singapore. “We see a lot of opportunity to grow in the O&G sector, especially in Indonesia where demand can only rise as the country develops.”


Shares of GSS are in fact up 98.8% this year, closing at 17 cents on June 7. That gives the stock a price-to-earnings multiple of 6.1, which Yeung argues is “way below its market value considering the agreement we have with Pertamina and the geography we are in”.

That could be because the O&G division has not generated any revenues yet. GSS’ earnings still come entirely from precision engineering.

For 1QFY2017, GSS reported a 28.3% y-o-y increase in revenue to $21.7 million. Earnings rose 55.5% to $1 million.

Yeung’s involvement with GSS dates back to August 2013, when he acquired a 29% stake in Giken Sakata through his private equity firm Roots Capital Asia. In November 2014, Yeung injected an entity called GSS Energy into Giken Sakata via a scheme of arrangement. At the time, GSS Energy was an investment holding company owned by Yeung. The listed entity was subsequently renamed, as Yeung’s intention was to transform it into an O&G company. GSS Energy subsequently acquired the right to extract oil from two oil fields in Java in 2015.

As it was still profitable, the precision engineering business was retained as a wholly-owned subsidiary of the company. That was just as well, as the contract in Java was cancelled in 2015. “At our current level, the market is still valuing us as a precision engineering company, not an O&G business. But once production commences this year, things will change,” says Yeung, who has been investing in and advising on Indonesian oil projects since 2007. Roots Capital Asia currently owns 18% of GSS.

Still, the timing for the restructuring is not great. The local O&G sector has lost its shine, as oil prices have stayed stubbornly low and companies in the exploration and production supply chain have reported losses. Others, including Swiber Holdings, Swissco Holdings and Ezra Holdings have defaulted on their loans.

Meanwhile, GSS’ precision engineering arm could continue to do well. The company will open a new engineering factory in Changzhou, China this year, which will focus on higher-value products and electronics manufacturing services. At present, it has two facilities: one in Singapore, and the other in Batam, Indonesia.

Sentifi - The Edge Markets Singapore - Top themes and market

Ryobi Kiso reverses out the red in FY2017 on absence of one-off losses

SINGAPORE (Aug 23): Ryobi Kiso Holdings posted earnings of $0.8 million for the full year ended June, swinging out from losses of $11.4 million a year ago. This was mainly due to the absence of a one-off items which amounted to other losses of $13.9 million a year ago. These comprised the one-off unrecoverable progress claim of $7.4 million that was written off, and the one-off impairment loss of goodwill of $5.6 million in relation to its Australia subsidiaries in FY2016. Revenue fell 24.2% to $144.8 million in FY2017, from $191.0 million a year ago. Revenue from bored piling operati....

iX Biopharma net losses for FY17 narrow to $7.4 mil

SINGAPORE (Aug 23): iX Biopharma, the specialty pharmaceutical company, reported net losses for FY17 ended June narrowed to $7.4 million from losses of $7.7 million a year ago. Revenue rose 10% to $6.4 million. The group currently derives its main source of revenue from the chemical analysis business which saw an 11% rise to $6.3 million from $5.7 million. Revenue from specialty pharmaceutical fell 52% to $49,000 from $103,000. Despite increased activities, iX Biopharma says expenses remained well-managed. For the full financial year, R&D expenses came in at $4.81 million in FY17 ....

AusGroup says AMJV awarded extension of works on Ichthys Project Onshore LNG Facilities worth $178 mil

SINGAPORE (Aug 23): AusGroup today announced that AMJV has been awarded an extension of works on the INPEX-operated Ichthys LNG Project by JKC Australia LNG worth A$165 million ($177.9 million). See: AusGroup subsidiary wins contract for INPEX-operated Ichthys project AMJV is a joint venture between AGC Industries, a subsidiary of AusGroup, and Meisei Industrial. The scope of work for subcontract that was initially awarded in 2014 has been increased to include further painting, surface protection, fireproofing and insulation works for the onshore facilities near Darwin, Australia. ....