hy, page-12

re: ebitda p/e (way undervalued) Your implied comment that AMU's eps is only enough to justify a share price of around 95 cents would be valid if the company were standing still and had no real prospects for higher production, revenue and profits. But all the evidence points to this not being the case. The half-yearly provides plenty of info on to support this view.

It clearly shows AMU fundamentals are still very strong and that the thr future will just get better and better:
* EBITA more than doubled to $13.2m
* Profit after tax up 38% to $6.6m (up from last half year of $4.7m which included 42.2m from the ARW sell down). So this profit growth is solely from AMU's
core oil and gas business and indicative of what to expect in future
* Revenue up 127% to $21.1m (59% increase in oil production and a 345% increase in gas production)
* Cash flow from operating activities more than doubled to $8.9m
* Reserve valuation for banking purposes (ie very conservative!) shows a 211% increase in oil reserves and a 218% increase in gas reserves - with a total value of US$196m (A$269m).
* About to undertake an 18 well back to back drilling program on Lavaca (past success here running around 70% - why should this program expect any different)
County and another 15 wells on other ground.
* in addition, AMU has identified 15 wells on the new Kansas ground for polymer treatment - which is expected to increase each well's production
5-fold (this polymer treatment has a payback period of about 1 month!)
* balance sheet at December shows $13.8m in cash and $100m in debt
* Interest rate hedge for US$40m at 4.952%
* cap and collar hedge for oil - $52 to $90 and for gas - $8.00 to $20.00. Limits downside from weaker prices but leaves amples of exposure to upside.
* holding in ARW worth about $55m or around 30 cents a share (and expect this to increase substantially when ARW's two plants come on stream in the next month or so)

AMU looks damn solid to me, with plenty of upside in the offing. Prior to some of their recent purchases, Shaw's had a valuation of $1.68 per share on AMU. Developments since then have added substantially to its fundamental appeal.