Tuesday, September 02, 2008

Ranhill bites the bullet

Ranhill announced its results for 4Q2008 ended 30/6/2008. It was quite a shocker! Ranhill reported a net loss of RM719 million on the back of a turnover of RM505 million for QE30/6/2008. The losses came from the following:

1) losses on disposal of 4 companies involved in Oil & Gas sector; and
2) losses incurred in the Melut Basin project in Sudan totaling RM556 million [consisting of amount due from the employer, Petrodar Oil Development Company (“PDOC”) of RM316 million & amount due from fellow JV partner, Petroneeds Services International (“Petroneeds”) of RM240 million].

Ranhill's management has been consistently denying the potential losses incurred in the Sudan project, which was reported in the press since 2005 (see an example here). The company has finally admitted to the losses & made the appropriate provision in its books. The disposal of the 4 Oil & Gas companies could signal an end to Ranhill's ambition to be an oil producer, as the assets sold include its 52%-stake in Bumi Parahayangan Ranhill Energia Citarum Pte Ltd (“BPREC”), which is involved in the exploration of the Citarum Block in West Java. Exploration work on this block was suspended in March this year, pending further testing as earlier tests produced "mostly formation water and significant traces of hydrocarbon gases" (go here for more).

Technically speaking, the weekly chart shows that Ranhill has broken above its medium-term downtrend line at the RM1.10 level. With this set of results, the share price could drift lower & possibly re-test its recent low of RM0.80. A break of the RM0.80 level could send the stock to the low of RM0.67-70, recorded in December 2005.

Chart: Ranhill's weekly chart as at August 29th (source: Quickcharts)

Based on its recent poor results & uncertain outlook, Ranhill is likely to 'underperform' the market for a while.

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