We noted that Falcon Energy Group (Falcon) recently carried out some share buy-back activities and absorbed back approximately 2m shares (at an average daily price of between 34.8 cts and 37.2 cts) from the open market this month. This seems to be a signal from the management that Falcon?s current share price is not justified.
Netting off the figures, the transaction works out to an attributable profit of US$26m which Falcon will probably recognize in its upcoming 2Q results.
On the marine division, we expect the company to deploy its 2X 78m multi-functional support vessels over the next two months and these vessels are capable of generating bareboat annual revenue of US$9+m each, if fully deployed. We also expect charter rates for the other vessels to be healthy given current high energy prices and active drilling programmes. We now estimate utilization rate for the remaining FY2014 to be around 80%.
Nonetheless, we expect the marine division to lead the group in profitability and Falcon may generate US$5m, US$7m and US$7m PAT for the next three quarters. We leave our estimates for the oilfield services and oilfield projects intact and assume negligible contribution from the resource division.
In view of the positive outlook, we now revise our intrinsic value to S$0.550 per share. Maintain Increase Exposure.
Falcon?s share price has also recovered to near its one-year high level of S$0.42 per share. As of end June 2013, Falcon has 162.8m outstanding warrants with an exercise price of S$0.40 per share. The last conversion date for the warrant is 1 Nov 2013. (Read Report)
