Hibiscus Petroleum

Recently, hibiscus petroleum's associate company Lime acquire 2 new concessionaire of petroleum exploration right in Norway and middle east. For your information, Hibiscus Petroleum is the first SPAC or special purpose acquisition company in Malaysia, startup IPO with no business, but using the fund raised from IPO to acquire a business within a certain period. So, 35% share of Lime is acquire recently. The transaction still pending shareholder approval. Due to Lime has several exploration right in middle east, Hibiscus Petroleum share rose to about RM1.60 from RM0.80. After this recent acquisition by Lime, Hibiscus Petroleum share price rose to RM2.10.

I would like to say here that I think Hibiscus Petroleum is a very risky investment. Because,

1st, exploration itself is a very risky business and require huge amount of investment. It might take 5 years or more from exploration stage to production stage before petroleum can be sucked up from the well. In between, no result or cash will come in, hence no dividend, more over, more cash may need to contribute into.

2nd, 35% is a minority stake, it may not have the power to control the financial or management of the Lime. It might be a passive investment and when Hibiscus Petroleum need cash or working capital, it can be only from bank, and from shareholder (potential more right issue in the future). What if the controlling shareholder do not want to pay out dividend?

Considering that, it is still speculating counter to me.

NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees. I may already have positions in the above mentioned counter. The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.