Linc Energy to Relist on SGX

The Singapore Exchange (SGX: S68) has been attracting a steady flow of new listings from the oil and gas exploration (E&P) sector due to a recent move to re-evaluate SGX listing rules to make it more attractive for such companies to float their shares. Some listed companies in this space include Interra Resources (SGX: 5GI), Loyz Energy (SGX: 594), and RH PetroGas (SGX: T13).

The latest to be attracted to the Singapore’s capital market is Linc Energy. Previously listed in the Australian Securities Exchange, Queensland-based oil, shale and coal company Linc Energy (LNC) is calling SGX home now as a move to broaden the investor base and tap the growing demand for oil and gas resources in Asia.

Linc Energy is a diversified energy company with three business divisions: Conventional Oil And Gas, Unconventional Oil And Gas, Coal. It also owns a significant portfolio of various oil, gas and coal assets and proven UCG technology ready for commercialization. The IPO is launched on 12 Dec at an offering price of S$1.20 each and Linc Energy expects to raise net proceeds of about S$57.4 million through the sale of 47.85 million shares.

Based on its prospectus, Linc Energy is panning out its growth story to potential investors based on 2 key points:

1) It owns high quality, low risk, oil levered production with an estimated reserves valuation exceeding US$4.6 Billion.

2) They believe that Linc Energy is the only company in the world to have utilized the UCG technology to produce diesel and jet fuel, which provides them with a first mover advantage.

linc energy graph 2

Source: Linc Energy’s IPO prospectus

On the other hand, investors should be aware of the pertaining risk factors too. Similar to the previous 2 listed E&P companies, KrisEnergy (SGX: SK3) and Rex International (SGX: 5WH), Linc Energy is still making losses despite its revenue growing at an aggressive pace.

Furthermore, exploration and development involves numerous risks and substantial and uncertain costs that may not yield desired results, resources or reserves for the company. These flops may result in substantial losses and unforeseen interruptions to Linc’s operations.

Potential investors can take heart that the IPO has garnered strong support from major Malaysian conglomerate Genting as a cornerstone shareholder. In addition, Peter Bond, CEO of the firm, has aligned interests with the shareholders to grow the company with his almost 40% stake in Linc Energy. Nevertheless, it is important to perform due diligence on any company alike, in order to understand what you are investing in.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.   Motley Fool Singapore contributor James Yeo does not own shares in any companies as mentioned.