• Business profile: Following its restructuring plan in Nov 13, SUMATEC is engaged in the upstream sector via a JV agreement to develop the Rakushechnoye O&G field in West Kazakhstan. Rakushechnoye Field has a 2P Oil and Gas reserve of 139.4m barrels of oil equivalent.
• To further solidify its presence in Kazakhstan, SUMATEC entered a Share Purchase Agreement in Sep 14 for the proposed acquisition of 100% equity interest in Borneo Energy O&G Ltd for USD290m. Borneo Energy (via its 100% subsidiary) is involved in the exploration, production and trading of oil and natural gas to develop the Buzachi Fields located in Western Kazakhstan. The group has two 25-year subsoil use contracts, valid until Nov 2026. The combined 2P certified reserves of the Buzachi Fields are 68.8 m barrels of oil. The proposed acquisition is settled by US$210m cash and the balance US$80m by way of issuance of 1.217bn consideration shares at an issue price of RM0.23 per share.
• Latest corporate proposal: Proposed Rights Issue with Warrants will be a renounceable rights issue of up to 5.517bn new Rights Shares together with up to 2.758bn Rights Warrants at an indicative issue price of RM0.20 per Rights Share on the basis of six (6) Rights Share for every five (5) SUMATEC Shares held together with one (1) Rights Warrant for every two (2) Rights Shares subscribed. Bursa Malaysia had given an extension of time of six months from 23 August 2015 to 22 February 2016 for the Company to complete the implementation of the above proposals.
• Posied for a downtrend line breakout. Since tumbling from the 2-year high of RM0.62 (20 Aug 14) to the low of RM0.10 (25 Aug 15), SUMATEC’s correction phase may have been exhausted.
• As share prices are currently trending above 10-d/20-d/30-d/50-d SMAs, underpinned by a strong uptrend line (on daily chart) and improving oscillators coupled with a rebound in crude oil prices , SUMATEC is poised for a downtrend line breakout soon near RM0.16.
• A decisive breakout above RM0.16 will spur prices higher to retest RM0.17 (61.8% FR and 100-d SMA) and RM0.185 (76.4% FR). Immediate supports are situated at RM0.145 (50-d SMA) and RM0.14 (30-d SMA). Cut loss at RM0.13.

Source: Hong Leong Investment Bank Research - 7 Oct 2015