buy recomendation

APSEC have a new buy rec on KAR with a value of 6.93 here is part of it.

We believe Karoon's shares have been overly depressed from their highs of $12.10 due to a number setbacks that include the failed attempt to float the company’s South American assets, a dry Browse Basin hole result and speculation that the Talbot Group is looking to sell its 12 percent stake.
Regarding the Talbot Group speculation, Talbot Chairman Don Nissen recently said that the company has not sold any shares in Karoon Gas since making its purchase and has no plans to change this stance. The financial review reported that the Talbot Group is understood to want at least $10 per share for its stake far above the current share price.
Karoon Gas Executive Chairman Robert Hosking has reportedly said that he now believes the company is better off without the South American IPO. We see this statement as generally true as Karoon has been able to raise significant capital to pursue its exploration efforts and has the flexibility of farming out parts of its South American assets.
Lastly, it has been reported that Karoon Gas, its partners and potential partners will spend between $800 million to $1 billion in exploration expenditure over the next two years which is more than what some of the big players such as BHP are planning on spending.
The company is planning to start drilling five to eight wells at its Browse Basin tenements and increase its Poseidon discovery which currently stands at 10Tcf in the P50 and P90 categories. Karoon's Gas joint venture partner Conoco Phillip's has estimated that the field could contain as much as 15-20 TCF which would be enough to support another major LNG project. The program is expected to last between 18-24 months.
Karoon also plans to drill three holes in Brazil's Santos Basin targeting in excess of 200 million barrels in each. Additionally, the company is hoping to make some smaller discoveries by drilling the Tumbes Basin located in Peru.
We believe a major advantage for Karoon Gas is that its joint venture partner Conoco Phillips which owns 60% of the Browse well, Boreas-1, will fund 80% of the capital expenditure to fulfill its farm in commitments. We believe Karoon gas is undervalued based on its current resources but see the potential for a major re-rating should a positive discovery occur which we believe is quite feasible given the amount of exploration dollars being spent.
Financial Position and Valuation
Karoon Gas is still in the exploration stage and therefore does not earn any revenue other than interest income. For FY2011 the company reported a loss of $23.3 million compared to a loss of $14.8 million for the pcp. The company is well funded with $266.8 million in cash on the balance sheet and no debt.
Given the company’s large scale oil and gas assets that have an estimated net present value of over $10 billion, we believe Karoon Gas shares are undervalued, even after the recent strong rally. We value the shares at $6.93 per share which provides us with a 34% margin of safety.