It has gradually exited the cyclical and loss-making construction / engineering business over the past two years to focus on new opportunities in the energy sector. Following the disposal of four building and engineering-related subsidiaries early this year, Magnus is now emerging as a niche resource player in the upstream oil, gas and coal industries.

54.4% owned Mid-Continent is one of the largest stockist and equipment supplier (mainly pipes, valves and consumables) to the oil drilling market in SE Asia and is well placed to benefit from the offshore oil boom. 40% of its revenues were derived from a JV with Mitsubishi. To gain a foothold in the oil and gas industry, it invested A$2.5m in a 25% participating interest in Australia's Cooper Basin gas deposits. Initial survey from one exploration well found 24bcf of gas reserves but the field is still far from being economically viable and may be eventually hived off to the bigger players.

In Aug 06, the group entered into a $26.6m deal to acquire a 75% stake in Yongda, which owns three oilfield concessions covering 17 sq km in China's Jilin province with proven oil reserves of 43m barrels. Under its 20-year PSC with CNPC, Yongda gets to keep 80% (Aug 99-Aug 09) and 60% (Aug 09-Aug 19) share of production volume, which will be entirely sold to CNPC. Currently, Yongda has 57 oil wells pumping out >300bpd and plans to quickly ramp up production to 450bpd (+26 wells) and to 700bpd within 12-18 months. Based on an average price of US$65/bbl, KE forecasts oil sales to contribute net attributable profit of $5.7m to the group's bottomline in FY08.

Following its US$18m purchase of PT Deefu Chemical, Magnus has an effective 68.4% interest in the 68,360-ha Kuaro coal concession (30 years) in East Kalimantan, which has an estimated inferred coal reserve of ~500m tons. Capital investment required to develop this coal project will cost ~US$5-7m and initial production is expected to commence in mid 07 starting with 40k tons/mth and going up to 100-150k tons/mth. Factoring in FOB coal price of US$32/ton, 13.5% government royalty and extraction cost of US$18/ton, we are projecting coal mining to haul in net earnings of S$3.3m and S$8.3m for the group in FY08 and FY09 respectively.

KE anticipates Magnus to return to profitability in FY07 rising to $18.3m in FY10 but EPS will be dented by its huge capital base of 1.54bn shares, which may see a further 9.3% increase in FY07. This is because the group has been financing its recent acquisitions mainly via equity despite its low gearing. Unless the group strikes a big oil or gas discovery or manages to extract a lot more from its oilfields or coal mines, the stock is fairly valued at forward PER valuations of 25x and 15.6x for FY08 and FY09.

Just imagine 10 mil shares changed hand at 15:10 hours, must be a very big boys brought up at $0.15 (fund mgr), more thing coming... up/down?? my guesss is up($^_^$) look like it is better off compare to GlobalVoice, today on profit taking. It closed unchanged at $0.15, can post to test $0.20 ++ in a few weeks. Any comment??. 

Published August 24, 2006
By RONNIE LIM (Thk to Business Times  paper).

Any one following this stock?, closed off +0.015 cts to $$0.15 on a vol of 25.8mil shares changed hands.

Magnus is to pump $6m more in its China?s oilfield in Jilin province which it paid $26.6 mil for a 75% stake - intends to spend over the next few mths to ramp up production there. Yongda oilfield concession which is producing over 300/barrels (bpd), with the last average transacted price at US$73 a barrel. Songyuan Yongda Oilfields Exploration and Technology Co - have not been putting in cap ex to maintain and expand production at the field, which was producing about 700 bpd since 1999, so Magnus now plans to spend an initial S$4-6 mil to get output back up again. 'This should boost current production by 50% to 450 bpd within the next 3 to 6 mths, and hopefully should be back to 700 bpd again within a yr.

'We were introduced through a business consultant, as the vendor was in fact looking at a possible reverse takeover in S'pore.' Yongda, he said, is an attractive deal as it comprises three oilfields with reserves of 43 million barrels of crude certified by China National Petroleum Corp (CNPC). The field is already at production stage, after CNPC earlier spent US$10-20 mil on exploration drilling.

Mid-Continent, (Magnus - 25% interest in a gas field in the Cooper Basin in Southern Australia where an exploration well has uncovered gas reserves, although the field is not yet in production. A small management team of geologists and reservoir engineers from Mid-Continent Australia, will be at the Chinese oilfield for the next 6 mths to do evaluation, he said, although Yongda's existing team of 30 professionals, mainly ex-CNPC staff, are fully capable of managing the 67 wells there.

Magnus wanted Yongda to hold the remainder 25% stake so that the Chinese partners 'would remain involved / help in possible future acquisitions . . . as there are lots of other interesting fields around,' Mr Chan added.

It oso plans to go ahead / develop an Indonesian coal mine later this year. On the coal front, Bulk Trading of Switzerland is undertaking feasibility studies on Magnus' coal assets in Indonesia to assess whether it will join Magnus to explore and develop its coal mining concession in East Kalimantan. As a global coal trading company, Bulk Trading will also be able to help Magnus market the coal, Mr Chan said.

'The results of the study are expected within the next 2 mths, but with or w/o the Swiss, Magnus intends to go ahead with the coal project,' he said.

The former mechanical engineering coy is oso applying to the SGX, to reclassified as an energy play and is the only local sgx listed player to by 1st to secured it right to supplies crude oil to CNPC.