Charisma Energy Services Enlarged Share Float

Recently my holdings in this penny stock in Singapore has jumped quite significantly, so I am covering it abit more than usual. Yesterday the price nosedived from its support of 5.8c to today’s current 4.9/5.0.

While this seems to be pretty bad news, the actual reason was due to a 11% increase in share float. From previously approximately 8.6 billion shares floating in the market, the float has ballooned to 9.6 billion,

Based on initial calculations, this share float increment should reduce the price from ((5.8/111)*100) = 5.2c. however, that doesn't seem to have stopped the stock from plummeting to deeper depths.

As such, I have increased my holdings as I am quite confident that the stock is a good value play.

Here are several points to note:

1) Red In FY2013
Booking a SGD421,000 loss in the full year is never a good thing for any listed company. However, this compares with a SGD1,043,000 loss in FY2012. The key here is that Charisma (previously named YHM) was only recently taken over by Ezion Holdings, so the turnaround will take time.

2) Contract Wins
Since the takeover from Ezion, Charisma, YHM and its subsidiaries have won four contracts till date, as far as I can count. The total value of these contract wins amount to USD407mil in total although they range from a period of 3 years up to 20 years. There is a steady flow of contracts coming in on a timely basis and that is what is going to matter in the growth of Charisma Energy.

3) Profit Almost Secured This Year
One of its subsidiaries recently announced a transaction that is expected to be completed in 2Q2014 (which is this quarter!). Upon completion, the transaction is expected to contribute a net profit of approximately USD7mil to the company. This translates to 0.07c in per share earnings, which is a strong positive.

4) Contract Wins Vs Market Cap
I’m not sure if I’m calculating this right, since the some of the contract wins are over an extended period of time (do I need to do this on a per year basis instead?). At today’s price of 5c, the market capitalization of Charisma Energy is now at SGD500mil. Contract wins at USD407mil is worth approximately SGD509mil (assuming USDSGD = 1.25). This means that the forward Price-To-Book Ratio is 0.98. This would mean that the stock is undervalued…in my books at least :P Of course I may be very wrong in assuming that Contract wins = Book value.

5) One Fat Mother
With Ezion holdings on an almost obscene tear recently, buying or investing in so many potential partners, there is a lot of confidence in the stock being able to snag a share of the spoils as its expansion extrapolates. At this rate, Ezion Holdings may turn into a blue chip in a few more years.

With this analysis, I am hoping that I am right in spotting the value in this company and what could potentially be unlocked. This coming Monday is the Charisma Energy AGM and hopefully I will be able to find more reason to keep holding this stock.