abn amros coverage and expectations

Nice to see more brokers covering ESG. Their target of $1.10 has plenty of upside in it as per the last paragragh of the report:

"We have lifted our sum-of-the-parts valuation and target price for ESG from A$0.57 to A$1.10. Most of the value – A$0.71ps – is derived from assigning a value of A$1.00/GJ to the 1,300PJ of gas that ESG expects to report in the 2P reserves category in PAL2 and PEL 238, less the value
assigned to the committed reserves for the MacGen MOU. We have also assigned value to Wilga Park Power Station and assume an expansion of capacity to 40MW. The valuation is not without risk both upside and downside.

Upside stems from realisation of the value of CSG reserves in line with the prices paid for Sydney Gas and for the Gloucester Basin acreage held by AJH Lucas and Molopo. There is also substantial upside potential from conversion of the c4000PJ of gas currently classified as 3P
contingent resources. Downside risk would arise with failure of the pilot to deliver, or a substantial
decline for an extended period from current low levels in the domestic gas price."

So multiple upside risks and only one downside (domestic gas prices) which is unlikely IMHO. If there is corporate interest then the prices AGL paid come into play and we are talking a multiple of their valuation. Also ... they mention the 4,000 Pj of 3C .... in a takeover by a major who would immediately have a market for this gas (eg Santos, Shell or others) then this contigent resource becomes reserves and the upside is far higher.

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