TECFAST (0084) : An Almost Guaranteed 80% Upside?
This post was originally posted here. The writer, Teoh Tian Heng is a veteran community member and blogger on InvestingNote, with a username known as @thteoh58.
Dear investors, if you are reading the article, that means that you surely are not settling with a mere 10% to 15% rate of return per annum for your investments. I mean, who does?
Anyway, the article today will show you a qualitative and quantitative study on the business of TECFAST as well as the finances, as to how this company could be almost guaranteed to deliver a MINIMAL of 60% upside.
TECFAST (or the “Company”) had an elaborate plan as to what, and when to venture into the oil and gas business. Dated 6th November 2020, we noticed that there is an LOI between Fast Energy Sdn Bhd (“FESB”), a wholly owned subsidiary of TECFAST and Zillion Oil Timor LDA. This marks the very beginning of journey for TECFAST to enjoy the recovery of busy offshore activities as well as the recovering oil price.
However, the LOI does not show any materialized information. It was until 15th March 2021 that the Company starts to deliver on what they promised.
Dated 15th March 2021, the Company had entered into a supply agreement between FESB and Wise Marine Pte Ltd (“Wise Marine”) – one of the largest ship management services players in Singapore, with a total contract value of RM2,222,856,000.00. With this size of a contract, it is normal for investor to treat it as some “not realistic”. Hence, the reflect in share price upon the announcement.
A deeper study into a contract would note that FESB would supply up to 30,000 metric tonnes of low sulphur fuel oil, low sulphur marine gasoil and high sulphur fuel oil per month to Wise Marine. The marine gasoil or fuel oil are collectively known as Marine Gas Oil (“MGO”). MGO are mainly used to power offshore transportation vehicles, such as oil tank, vessels, bunker ship and so forth. It is also interesting to point out that whatever FESB was selling to Wise Marine are based on a certain premium on top of the costs, are more commonly known as the “Cost-Plus” basis. This does not mean that FESB will never suffer losses, but as long as MGO prices are stable or on an uptrend, TECFAST as the holding company, would be the beneficiary of it.
A reference on Singapore Mogas 95 Unleaded Futures could see that since July 2020, the prices of MGOs are increasing on a steadfast trend.