Reflections on Volume

Big volume without further upside equals distribution
Big volume without further downside equals accumulation

Volume tends to peak at turning points
Volume often precedes price movement
Volume is a relative study

Thursday, January 27, 2011

Kencana completes placement, gets RM398mil

PETALING JAYA: Kencana Petroleum Bhd's private placement of 166.7 million shares of 10 sen each via its book-building exercise has been completed.

The issue price that has been fixed at RM2.38 each would result in gross proceeds of about RM397.6mil.

The issue price represented about 1.65% discount to the closing price of Kencana shares on Jan 25 of RM2.42. It is believed that the shares were oversubscribed by 3.5 times.

Maybank Investment Bank Bhd chief executive officer Tengku Datuk Zafrul Tengku Abdul Aziz said the private placement received a strong demand from both international and domestic institutional investors.

This was despite a very tight discount to the closing market price and the correction in Asian equity markets, he said.

“This indicates investors' confidence in the future of Kencana,” Tengku Zafrul said in a statement yesterday. Maybank Investment is the joint adviser of the private placement.

Nevertheless, Kencana had yet to reveal how it is going to use the proceeds as well as the identity of the investors, although it is believed that they include Permodalan Nasional Bhd, Employees Provident Fund and Kumpulan Wang Persaraaan.

Attempts to contact Kencana group chief executive officer Datuk Mokhzani Mahathir was unsuccessful.

Last month, it was reported that Kencana planned to raise RM800mil via a private placement as well as the issuance of Islamic bonds and warrants.

OSK Research analyst Jason Yap believed the fund-raising exercise would be invested in the company's local marginal fields.

Prime Minister Datuk Seri Najib Tun Razak, on Jan 11, announced billions of ringgit worth of investment in the oil and gas industry to enhance oil extraction from marginal fields.

Kencana, alongside SapuraCrest Petroleum Bhd, are widely speculated to be the local frontrunners for the marginal fields developments.

Petronas will unveil a new business model on the development of marginal oil fields and local players are expected to team up with more experienced foreign partners.

“There is no earnings guidance revealed as yet but I believe initial works for the marginal fields would be fabrication of structures.

“The opportunities to co-manage the marginal fields will enable local players to learn and upgrade their portfolio,” Yap told StarBiz.

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