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

Sunday, December 11, 2011

The making of Sapura Kencana Petroleum

The creation of an oil and gas giant hasbegun. SapuraCrest Petroleum Bhd and Kencana Petroleum Bhd will be going through an RM11.85bil merger exercise to create the largest oil service provider by assets in the country - soon to be known as Sapura Kencana Petroleum Bhd.

For now, under a cash and share swap deal, a special purpose vehicle called Integral Key Sdn Bhd would be buying all the assets and liabilities of SapuraCrest for RM5.87bil and Kencana for RM5.98bil.

This shall be satisfied by some five billion Integral Key shares priced at RM2, and RM1.84bil in cash.

Integral Key has offered to acquire the SapuraCrest business for RM5.87bil equivalent to RM4.60 per share. It will acquire Kencana's business for RM5.98bil equivalent to RM3 per share.

At RM2, Integral Key's implied price earnings (PE) is approximately 20 times. The historical PE multiple of Kencana and SapuraCrest are 28.04 times and 25.41 times respectively.


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