Friday, 24 April 2015

To Cliq or not to Cliq? (4)

Cliq Energy announced the result of the fairness opinion by the independent valuation expert, Deloitte.

First of all, "good old" DCF is used. As usual, a long list of assumptions, some of which are very important:



Secondly, the result of the valuation is presented:


While the outcome of a DCF calculation can hugely change according to which parameters one uses, the final range of 113M to 124M falls "exactly" around the purchase consideration of 117M. Too much of a coincidence?

As usual, no details of the DCF are given, so we can't check anything of the actual calculation.

As often described in this blog, I don't like DCF valuations based on a huge amount of assumptions, some of which (for instance the amount of reserves, the price of oil, political/regional conditions, etc.) would alter the result by a huge margin.

Just to detail one aspect, how can one calculate the uncertainty of investing in a country like Kazakhstan? I honestly have no idea how to incorporate country or regional risk in an objective way in a DCF calculation.

On a more positive note, a comparison with similar deals is presented, something that makes much more sense to me:



The average price per boe (barrel of oil equivalent) of the three deals is USD 6.41, while Cliq only pays USD 5.82, that looks good.

But the most recent deal done is by Sumatec Resources (relevant since the price of oil and market conditions were similar to Cliq's) was done at a price of only USD 4.21 per boe. The question is why does Cliq pay 38% more per boe than Sumatec?

Unfortunately, there are no other details regarding the three deals, and how they compare to the proposed deal of Cliq (for instance the existence of assets or liabilities other than the oil reserves in the target companies).

The evaluation of Deloitte is that the deal is "fair and reasonable", which is no surprise because it was more or less announced before by the CEO:

"We know that it will fall within the fair market value, but I'm not saying 100% it will. We have intelligently analysed that the acquisition value is going to be within the fair market value unless oil prices fall to US$ 20".

Thursday, 23 April 2015

Icon Offshore: CEO and COO remanded (2)

Some more information on this matter due to a query from Bursa:


1) The financial and operational impact of the Remand

We do not expect the Remand to have any financial or operational impact to the group as our Deputy Chief Executive Officer, Captain Hassan bin Ali (“Captain Hassan”) continues to be responsible for the day-to-day management of our Company as well as the co-ordination of the administrative and business activities of our group.


2) The steps taken and to be taken to ensure that the operations/business of the Company/group is not adversely affected while the CEO and COO are being remanded

In the absence of the Chief Executive Officer, Captain Hassan, as the Deputy CEO ("Deputy CEO")   has assumed the functions of the CEO with effect from 22 April 2015, in addition to his existing responsibilities. In light of the development, our Company has engaged our stakeholders, namely our customers and lenders to appraise them of the matter and at the same time, provide assurance to our stakeholders that it is business as usual for our group under the stewardship of our Deputy CEO. 


3) Duration of the Remand

We have been informed by the legal counsel representing the CEO and COO that the Remand is for a duration of three (3) days until 24 April 2015.

Unfortunately still no information what it is all about, we need to wait for that.

Wednesday, 22 April 2015

Icon Offshore: CEO and COO remanded

Quite shocking announcement by the company:


"To ensure fair market trading, the Board of Directors wishes to inform that Suruhanjaya Pencegah Rasuah Malaysia (“SPRM”) has remanded our Chief Executive Officer and Chief Operating Officer to facilitate and assist investigations currently being conducted by SPRM. The company has no details of the nature of the investigations or their status."


We have to wait for more news regarding this matter.

Noteworthy is that the CEO has lately been selling shares in the company.

Monday, 20 April 2015

TDC: ESOS and Digi's 3G licence

Article in The Star "TdC rewards CEO" about Time dotCom, some snippets (my comments in blue):


.... last week TdC granted him [Afzal Abdul Rahim, the CEO] a share option to subscribe to up to 17.22 million new TdC shares or 3% stake at an undisclosed price.

Afzal holds a 75% equity stake in Pulau Kapas Ventures Sdn Bhd, which owns the 36.24% stake in TdC, and Gan holds the remaining 25%.

“So if I am able to raise funds to exercise the option, that is an additional 3% over the next five years,’’ Afzal adds.


I am not in favour of share options and the like, I favour normal wages and a bonus based on realizing long term goals. That is more transparent and more fair, since shares can fluctuate wildly in the short term.

However, if share options are given out, then I would suggest to give it to management that has no stake yet in the company, to align their interest in the company. But Afzal has already a 75% stake in a company holding a 36% stake in Time dotCom, valued at RM 1.25 Billion. Surely someone owning such a large stake doesn't need anymore encouragement nor alignment?


“Had we [Time dotCom Bhd ] kept the 3G spectrum, we would have made a colossal mess of trying to roll it out. It was the right decision to transfer it to an operator [Digi] who knew what to do with it.


This is a rather stunning comment from somebody in the know and reflects badly on the controversial way the 3G licenses were given out in Malaysia in 2006. For some historical perspective, please read this article in The Star:


The government is not against foreigners investing in Malaysia, but "3G spectrum is a scare national resource,'' Lim said, according to the newspaper.

While admitting that the decision was controversial, Lim rejected criticism from analysts that the government had been unfair to DiGi.

"If I had given it to an unqualified company, then it is not fair,'' he was quoted as saying. The companies were evaluated based on their technical capability, financial management and business plans, he said. The Communications Ministry could not be reached Sunday to comment on the report. The two 3G licenses were awarded to fiber-optic operator TIME DotCom and unlisted pay-TV operator MiTV Corp.