As Singapore and global investors focus on brown-to-green transition financing, sustainability loans and the E in ESG, Rex International, an oil and gas producer with assets in Norway and Oman, has seen its share price creeping up.
In doing so, Rex’s share price has moved above the confluence of its 50- and 100-day moving averages which are at 16.7 cents and 16.2 cents respectively. Rex’s technical indicators look a lot better than those of other stocks (and S-REITs).
For instance, quarterly momentum is rising after a positive divergence and has moved above its equilibrium line. Similarly, short-term RSI has also moved up above its equilibrium line, in a rare synchronisation with the quarterly indicators.
Resistance appears at the still-declining 200-day moving average, currently at 18.15 cents. As prices approach this level, the ascent may pause, easing prices somewhat. Support should be assumed at the 16.2 to 16.7 cents area. Once the stock gets to 18.15 cents, the chart pattern and technical indicators should be relooked.
On Sept 12, Rex announced that in August 2023, production from Norway increased 182% y-o-y to a total of “about 7,726 barrels of oil equivalent per day (boepd)”, following the addition of production from the Yme Field; compared to production of 2,742 boepd from only the Brage Field in August 2022. Production from Norway and Oman totalled about 8,259 boepd for the month, the announcement says.
“With increased production and oil prices during 2023, the Company considers itself to be in a good and stable cash position,” the announcement says.
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In 1HFY2023 ended June, Rex announced a 7.5% y-o-y rise in revenue to US$106.92 million but a 36.9% y-o-y plunge in net profit to US$3.69 million. The decrease in net profit was mainly due to finance costs which more than doubled to US$11.6 million, a 29% y-o-y increase in production and operating expenses to US$43.56 million in 1HFY2023, and an increase in depletion of oil and gas properties to US$22.40 million, although this is a non-cash item.
More than that, Rex had negative operating cash flow and negative free cash flow. Hence, although the technical charts show an upward trajectory, this may be a short-term phenomenon before reality sets in.
Reality continues to plague the NikkoAM-Straits Trading Asia ex-Japan REIT ETF priced in Singapore dollars. The ETF attempts to replicate the performance of the FTSE EPRA NAREIT Asia ex-Japan REIT Index. Its top 10 components are Singapore and Hong Kong-listed REITs.
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Singapore makes up the lion’s share with a weightage of over 70%. The top five components are CapitaLand Integrated Commercial Trust (CICT, 10.5%), CapitaLand Ascendas REIT (CLAR, 10.3%), Link REIT (9%), Mapletree Logistics Trust (MLT, 7%), and Mapletree Industrial Trust (MIT, 5.5%).
Since the start of the year, CLAR, MLT, and MIT made modest single-digit gains, and CICT’s unit price has fallen by 6.9%, However, the ETF has been weighed down by Link REIT’s more than 30% decline since the start of the year following a rights issue, and the downwards revaluation of The Cabot, an office property in London.
Only a pause in its rate hike cycle by the Federal Reserve can help this ETF reverse its downtrend.
