Resources | 6 January 2011 BUY RH Petrogas Initiating Coverage A powerhouse in the making Analyst We initiate coverage on RH Petrogas (RHP) with a BUY recommendation and Rohan Suppiah target price of $1.35/share, which is based on a conservative sum‐of‐the‐parts
[email protected] (65) 6432 1455 valuation of its oilfield assets. RHP is the Rimbunan Hijau Group’s vehicle for its ambitions into the energy sector. Formerly an electronics company called Tri‐M, it has been transformed by the injection of Chinese oilfield assets, the acquisition of Orchard Energy from Temasek Holdings, and a subsequent Price $0.745 oilfield purchase in West Papua, Indonesia. We expect RHP to cement its place Target $1.35 as a major player in the regional upstream energy sector. ST Index 3,254.25 China oilfield acquistion kick‐started transformation RHP acquired Kingworld Resources (KRL) in 2008 for $110m from within the Historical Chart private holdings of the Tiong family. KRL’s primary asset is an oilfield concession in Northeast China. We conservatively estimate that this concession alone is Price ($) Vol ('000) 0.90 2,000 worth a minimum of $625m, or $1.29/share, and potentially worth several 0.80 1,500 multiples over this base value. 0.70 1,000 0.60 Enter the heavy hitters 500 0.50 In 2010, Orchard Energy along with its West Belida concession was acquired 0.40 0 from Temasek Holdings. The real jewel in the crown from this deal is the 10 10 10 10 10 10 10 11 10 10 10 10 10 10 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Jul Oct Jan Jun Apr Jan ‐ Dec Nov Sep Aug Feb ‐ Mar Mar ‐ ‐ May ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ inheritance of Orchard Energy’s capable management team, led by industry ‐ 20 12 04 22 27 05 07 09 14 17 02 30 02 25 veteran Dr Tony Tan.