You know something is up when the share price and trading volume of a particular counter spikes. Stock of Chemoil Energy hiked as much as 39.2 percent to an intra-day high of US$0.355 on 8 February from the previous day close of US$0.255 before trading was halted. Meanwhile, trading volume jumped multiple folds to 4.84 million shares yesterday. In contrast, only 127,000 shares exchanged hands on 7 February.
Buying activities were heightened following news that Swiss commodity giant Glencore International, through its subsidiary Singfuel Investment, raised its 51.54% stake in Chemoil to a substantial 89.04%. In a filing with the Singapore Exchange on 7 February, Singfuel purchased 484.7 million shares from an anonymous seller.
Alex Yap, an analyst at Singapore-based consultancy FACTS Global Energy, shared his views on the deal. “Glencore and other traders want to position themselves to take advantage of Asia’s deficit of fuel oil,” he said, noting that from an energy standpoint, bunker trading has been a pretty good business for the last few years and it will continue to be hot given the imbalances in global bunker fuel supply.
Back in December 2009, Glencore acquired a 50.8 percent stake in Chemoil for approximately US$233.3 million from the Chandran family. Thereafter, it offered to snap up the remaining shares at US$0.3552 apiece. However, the offer fell through, leaving Itochu Group as the Singapore-listed marine fuel supplier’s other major shareholder then.
This latest move came almost simultaneously with Glencore’s bid for the remaining 66 percent of Xstrata in a US$41 billion deal. The merger will see Glencore and Xstrata form a company worth US$90 billion, making it a global powerhouse spanning mining, agriculture and trading, that can rival mining heavyweights. In the latest update according to Reuters, two of the top 10 shareholders in miner Xstrata have voiced out their plan to vote against the takeover, citing undervaluation as a reason.
For the nine months ended 30 September 2011, Chemoil returned to profitability with earnings of US$26.8 million on the back of a 48.2 percent surge in revenue. The improved performance was underpinned by increased ex-wharf sales in Asia with more aid coming from volumes generated by a business acquired in 2011.
As at 12:23pm on 9 February, Chemoil was trading at US$0.32, up 3.2 percent from 8 February closing price of US$0.31.