The SGD10,000 bet on KrisEnergy

A trade becomes an investment. On Tuesday, I had keyed in two trades of 10 lots for KrisEnergy at 54 cents each, one after the other. The first ten lots was to be settled and the next ten lots, contra-ed off. However, the market for KrisEnergy shares on Friday (T+3) were less liquid than usual and bids had sank to 50 cents. Contra-ing the ten lots would result in a SGD 500+ immediate loss. I have settled the trade and it now goes to my investment portfolio which is worth SGD 118,100 as of Friday closing.

Buying KrisEnergy was always on the cards for at least three reasons. Firstly, I think crude oil (Brent) prices have reached a floor and a rebound is inevitable. The full effects of the current low oil price on earnings will be seen by the second quarter of 2015 but lower
earnings should have been priced in. I will now just have to patiently wait and stay solvent to reap the fruits. Secondly, there is are many big hands holding on to this stock at a much higher price, and this will limit the downside of a stock that has fallen by half since listing on the stock exchange. Lastly, it has been 18 months since the listing of KrisEnergy and it is safe to assume that the lock-up period is over and anyone who got the shares cheap (management, IB, underwriters, etc) have cashed out , further limiting downside.

I will stick with this stock for 2 years before selling as there are two scenarios that will trigger significant upside for the stock. Sustained higher oil prices at USD70-80 bbls level will be enough to bring it to 80 cents per share and I expect these oil prices 2-3 years out. If oil prices recover and krisEnergy is successful with ongoing E&P efforts, it may attract interest from the bigger companies and prompt a takeover, bidding the price up.

There is no lesson learnt here other than to wait and see. And maybe revisit.