viewPo Valley Energy Limited

Po Valley price target raised to A$3 at FD Capital, still rated ‘buy’


Fox-Davies Capital has raised its price target on Po Valley Energy Ltd (ASX: PVE) to A$3.0 and reiterated its ‘buy’ rating on the stock.

Po Valley is an independent oil and gas exploration and production company listed on the Australia stock exchange and with assets in Italy, essentially in the Po Valley in the North of the country.

In its note, the broker said: “We believe that the market is inefficient in valuing the stock, as investors apply average valuation metrics to Po Valley’s resources whereas we argue that the stock should trade at a significant premium given the high value of its resource barrels that result from the high revenue share left to the contractor by a very favourable Italian fiscal regime.” The stock is currently trading around the A$1.55 mark.

Po Valley is expected to start maiden production sometime in November 2009 with the Castello development delivering 2.7million cubic feet per day, and aggregate production rising to 6.5mmcfd when the Sillaro production comes on stream. Castello and Sillaro have reserves of 6.3 billion cubic feet and 14.0Bcf respectively.

A further 45.7Bcf (un-risked 63.4Bcf) are due to come on stream during 2010/2011 as extension of existing production, delivering a combined production peak in excess of 30mmcfd in 2011/2012; while the exploration programme should add another 25Bcf (un-risked 50Bcf) to resources, the broker said.

“In our view, the current stock price only discounts the forthcoming production without giving much credit to the Company for the rest of the portfolio. Indeed additional value is provided by the forthcoming appraisal programme that adds AU$1.0 per share of value, while we estimate the exploration portfolio to be worth about AU$1.0 per share on a risked basis,” FD capital added.

It believes the stock can reach the A$3 price target within a 12-18 months horizon and that includes all of the development / appraisal projects that will be carried out during that period, together with some measure of further exploration potential.

Quick facts: Po Valley Energy Limited

Price: 0.036 AUD

Market: ASX
Market Cap: $23.3 m

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