IC recommendation August 201830 Jan 2019 22:50
Courtesy of investors chronicle repeated buy recommendations...
I would suggest to keep faith in G.
Tip Update: Buy at 298p
Tip style
SPECULATIVE
Risk rating
HIGH
Timescale
MEDIUM TERM
Our previous tip
We said BUY at 215p on 03 May 2018
Tip performance to date
+39%
By Alex Newman
Genel Energy (GENL) “continues to deliver on its focus”, reports chief executive Murat Özgül. In the first half of 2018, being a passenger to events also helped. Higher oil prices and a stellar performance from its 25 per cent interest in the DNO-operated Peshkabir field were the chief reasons why free cash flow jumped 28 per cent to $70.1m (£54.1m).
GENL:LSE
Genel Energy PLC
1mth
Today change
0.86% Price (GBP)
187.00
Thanks to a series of expectation-beating well results, the field now pumps around 35,000 barrels of oil per day (bopd), arresting gradual declines in the wider Tawke licence. Genel also used its interim numbers to flag “the potential for a material increase from current production levels”, and discussions with DNO to use excess gas from Peshkabir to boost recoveries from Tawke. The shares dutifully leapt 12 per cent.
Investors had other reasons to be cheerful. As Genel moves into a net cash position, options for the rest of the portfolio look more viable. In the second half of 2018, the group plans to expedite development of the 100 per cent-owned Bina Bawi field. The cost of reaching initial output of 5,000bopd is slight at just $20m, and could preface a rise in production to 10-15,000bopd within a year of works commencing.
On average, analysts expect full-year pre-tax profits of $133m and EPS of 47.9¢ this year, and $132m and 46.3¢ in 2019.
GENEL ENERGY (GENL)
ORD PRICE: 298p MARKET VALUE: £ 831m
TOUCH: 298-299p 12-MONTH HIGH: 302p LOW: 89p
DIVIDEND YIELD: NIL PE RATIO: 4
NET ASSET VALUE: 600¢* NET DEBT: 4%
Half-year to 30 Jun Turnover ($m) Pre-tax profit ($m) Earnings per share (¢) Dividend per share (¢)
2017 87.1 23.5 8.4 nil
2018 161 59.3 21.3 nil
% change +85 +152 +154 -
Ex-div: n/a
Payment: n/a
£1=$1.30. *Includes intangible assets of $1.26bn, or 453¢ a share.
IC View
These results landed as the US re-imposed sanctions on Iran, further tightening the oil market. But Genel isn’t just a leveraged bet on energy prices (215p, 3 May 2018), and success at Peshkabir has paved the way for investment in new production and reserves. Even without that multiplier effect, the shares trade at just 8 times this year’s earnings forecast. Buy.
Last IC View: Buy, 245p, 10 May 2018
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