We suspect as the wheels get put in motion to bring this transaction to completion that the latent value arbitrage will not have gone unnoticed by many other observers. Indeed, if I were the corporate partners/participants alluded to in the RNS of Tuesday I would simply look to take out Plc given the disparity in value between the value on the project and the Plc’s current market valuation in any residual interest. Buy.
The third alternate valuation route is to simply take the NPV on the project that has just been newly assessed at just over $1.05bn. Assuming a post farm in residual 30% interest in this results in a value of $315m. Based on the current FX rate this is a quarter of a billion pounds. If we halve this, halve and halve again for the risks still attached re completion in order to be ultra conservative, we get to £31.25m. Based on the current share count this produces a 10p per share level.
From note: Consider that back in 2011 that Plc shareholders, before the licence dispute, had a circa 80% interest in the licence area (adjusted for Cavaco & Veloso’s then stake) and the company was valued at £80m