EPIC has a bullish breakout

Over the past 3 weeks, EPIC share price has been inching up with increasing volume. In fact, EPIC broke above its medium-term downtrend line resistance at the RM1.20 level.

EPIC is involved in the oil & gas sector. Its main asset is the 60%-stake in Konsortium Pelabuhan Kemaman Sdn Bhd (KPK), which owns the Kemaman Port, a deepwater harbour, that can handle ships weighing 150,000 deadweight tonnes. The Kemaman Port owns 4 terminals, i.e. the East Dockyard and the Liquid Chemical Berth (LCB) Terminal; the Liquified Petroleum Gas Terminal (managed by Petronas); Kemaman Supply Base (managed by Pangkalan Bekalan Kemaman Sdn Bhd); and West Dockyard (managed by Road Builder/IJM). The port can manage up to 14 million tonnes of cargo.

The last 8 quarters' results are tabulated below. We can see that EPIC achieved a net profit of RM32.9 million on a turnover of RM249 million in the 4 latest quarters (up to 30/9/2008). Based on yesterday's closing price of RM1.34; EPS of 19.4 sen (from the last 4 quarters); and NTA per share of RM1.87 (as at 30/9/2008), EPIC is now trading at a PE of 6.9 times or a Price to Book of 0.7 times. At these multiples, EPIC is deemed fairly priced in this current market environment.



It has been rumored that EPIC may be taken private by the Terengganu state government. The latest report from the Edge indicates that this privatization effort may have hit a snag. The Terengganu state government, via Terengganu Inc Sdn Bhd (TISB), has apparently offered to privatize EPIC at a price of RM2.10 per share. TISB owns 40% of EPIC. The hurdle in the privatization came from EPIC's next largest shareholder, i.e. AZRB (which owns a 21.3%-stake in the company). AZRB is asking for a price of RM2.50. If the stalemate is unresolved, the market price of EPIC is likely to drift lower.


Chart: EPIC's weekly chart as at Feb 23, 2009 (source: Quickcharts)

There is a high chance that Terengganu state government will sweeten the offer since it is sitting on a huge cash reserve, arising from receipt of oil royalty from Petronas (go here). The alternative may also play out, i.e. AZRB may be willing to accept a lower price given the current economic environment & redeploy the cash proceed in its construction division (its main core of business). If you like to get into EPIC for this privatization play, I believe the good entry level is at RM1.10-20.