Why the share price is absurdly low19 Apr 2020 21:27
If we go back to when the share price was North of £20, we were badly undervalued to due a degree of uncertainty in the market as to our liabilities, production costs etc., and at that point we were valued at less than cash in bank, and the 20,000 of barrels per day of production was being ignored.
I believe that we were being valued based on the dividend payment stream, which in spite of being massively covered, many tomes over, we were then looked at in comparison with the majors such as Shell, and discounted accordingly, as a result of us being a market tiddler, with no dividend stream track history.
Accordingly, when the oil price crashed, we went down in line with the rest of the oil shares, and that is where we have stayed, moving in line with oil prices.
New prospective investors have a quick look at sites such as this and look at the last available financial information on these sites, and as it is SO out of date, we really look a bit poorly, with puss poor NAV per share and poor income.
Once the latest figures are correctly updated, the lazy investor that cannot be bothered to look at the latest Report and Accounts will finally realise 'Hang on, this is an absolute bargain, I might be tempted to stick a few quid in here and see how it goes.'
The other factor that would almost certainly help us to attract attention would be a bid for another company, as there's nothing like that for the Analysts to get their spreadsheets out and do a proper analysis of the combined value of the merged entities.
In addition, a major increase in our Market Cap would take us into a different sphere for prospective Institutional Investors, and I believe that proper medium/long-term heavy money is the only way that we will really motor. At present, we are still vulnerable to short-term trading, which is always going to result in traders reselling once they hit their target, and move on to the next rapidly rising opportunity.
I believe that the Board needs to either move ahead with another acquisition, or consider a share buy back programme, but this is not possible as Andrew Austin already holds 30% of the shares, so it would trigger a takeover requirement.
The only way therefore to do a buyback would be for AA to make simultaneous sales, which may be possible if set up as an approved scheme.
From the current oil price, our profitability levels are effectively very highly-geared, as the Brent price moves upwards, if that is the way it is going to go. If it moves downwards, with our low production costs mean that the downside impact isn't too bad and well covered by cash.
Another factor that would help us would be to increase our exposure to gas production so I believe that any potential targets will have a strong Gas element to them, which is good for both the short and longer terms.
Whatever the future holds, there can be no CEO that is more highly motivated to succeed than AA, both from a financial and also a narcissistic point of view.
Sign In
Follow the stocks
