rbc research - $1.60 price target

Hi Guys,

Have been following the RIA story with great interest since the acquisition of the african acreage. So far its been the best performer in my portfolio with more to come in the New year.

I dont know if anyone has seen this research note put out by Royal Bank of Canada about a week ago but please see the first page below. As there was 25 pages i have only copied the first page.

I agree with many comments in the forum that the price should easily move north next year, I really beleive that todays annoucement will rally the stock before the new year as it removes funding risk and increases our equity in the block. Although subdued today I think $1 by end of this year can be acheived as surely the instos will keep buying on this news?




INITIATION | COMMENT
DECEMBER 16, 2010
Rialto Energy Ltd. (ASX: RIA)
London Calling
Outperform
Speculative Risk
Price: 0.71
Shares O/S (MM): 266.1
Dividend: 0.00
NAVPS: 1.27
Price Target: 1.60
Implied All-In Return: 125%
Market Cap (MM): 189
Yield: NM
P/NAVPS: 0.6x
Development-led and exploration leveraged Rialto could come
to London in mid-2011.
Sydney listed, A$200m market cap, Rialto Energy provides investors with
exposure to four oilfield development candidates in the Cote d'Ivoire and the
exciting new exploration play that extends across the border from Ghana. We
initiate coverage with an Outperform, Speculative Risk recommendation and a
A$1.60 target price.
Focus: Rialto?s defining asset is a stake in Block CI-202, offshore southeast Cote
d?Ivoire, which encompasses four, fast-track, development candidates -
management is targeting first oil in 2012 - and a series of exploration prospects
and leads. A five-well drilling campaign is planned for Q4/11.
New Era: The development of these 1970-80s vintage discoveries is
commercially viable and advances in 3D reprocessing, as well as the experience
gleaned from Tullow Oil and Kosmos Energy?s successes targeting the play in
neighbouring Ghana, have enabled Rialto to map the stratigraphic/combination
traps with some confidence.
Valuation: Management intends to exploit the block with a large equity stake,
and based upon a 56% (post government back-in) interest in CI-202 we value
Rialto at A$1.27/share (PV15%).
Fund Raising: Given Rialto's large equity stake (and limited cash) we expect
management to embark on a fund raising in H1/11 that could culminate in a
listing on London?s AIM market. We estimate that Rialto needs to raise ~$125m.
Surging Up The Value Curve: The proposed fund raising and late 2011
appraisal drilling campaign dominate today's investment case. However, we
expect Rialto to morph rapidly into a development-led play, and the fast-track
exploitation of the oil accumulations on CI-202 should increase Rialto's value
markedly. Looking ahead, organic cash flow could fund further growth and
exploration drilling.
Target Price: Assuming a $125m placing at the current A$0.71 share price, our
NAV would fall to ~A$1.10/share. But, as Rialto's business case is dominated by
the development of the four oil accumulations, we have set our 12-month target
price in line with our (diluted) year-end 2011 PV15% of A$1.60.
Risks: The key risk to our valuation is the company?s ability to raise the
necessary capital. However, appraisal drilling is risky, and looking further ahead
the development costs, timescales, production profiles, etc. could vary markedly
from our current assumptions.