valuation

Morgan Stanley's view on the AUT bid for EKA:

? AUT take-over bid for EKA value accretive if successful — AUT has made an A$0.45/shr (an EV of ~A$101m) on-market take over bid for EKA. EKA has a 6.25% interest (1,521 net acres) in the Sugarloaf AMI in which AUT also participates, as well as ~5200 net acres of acreage located in the lower value EagleFord oil window. Based on our AUT valuation of Sugarloaf, we value EKA's interests in Sugarloaf at ~A$165m on a risk adjusted basis, suggesting AUT is offering a ~38% discount to asset valuation excluding any value for the oil acreage. We would be surprised if EKA management did not recommend its shareholders reject AUT’s hostile offer. While AUT's offer represents a significant discount to our DCF valuation, AUT trades at a ~20% premium to our DCF. We have not factored the acquisition into our DCF, though as the deal stands it would add ~A$0.15/shr to our Target Price. On our forecasts we think AUT has sufficient cash / debt facilities to purchase and develop the asset without issuing equity.

So reading this Morgan Stanley view 'fair value' for the EKA aquisition to be at $0.725.

Worth noting that AUT have not stated this bid to be first and final. Iam epxecting a higher offer and would be happy if AUT were to increase the offer to $0.60.