Hi allI have done an analysis of EGO v EMR v FAR v PCL and...

Hi all

I have done an analysis of EGO v EMR v FAR v PCL and calculated which of the four stocks gives you the best leverage leading up to the results of the drill


EGO


EGO shares on issue as per 13 August 2007: 1.93 billion

+ 50 million options outstanding that are in the money

+ 287,000,000 to be issued from a recent placement

= 2.27 billion shares on issue

Current share price = 3.5c

Market cap = $79.4 million


EMR

EMR shares on issue = 50.2 million

Listed options in the money = 35.6million

Unlisted shares and options = 19million

EMR has approximately 104 million shares on issue

Current share price = 22c

Market cap = $23million



FAR

FAR has approximately 500 million shares and options on issue

Current share price = 11c

Market cap = $55 million



PCL

PCL has approximately 480 million shares and options on issue (Some options are currently out of the money but will be in money should a successful find occur)

Current share price = 6.4c

Mkt cap = $31million



Current interests of these JV partners

EGO = 14.8%

EMR = 12.75%

PCL = 10%

FAR = 8%


Given EGO’s interest is the highest of all the JV listed partners (excluding ARQ), I will use it as the benchmark for calculating the other partners revised market caps

EGO = $79million

EMR = (12.75/14.8) * $79.4m = $68.4 million

PCL = (10/14.8) * $79.4m = $53.6 million

FAR = (8/14.8) * $79.4m = $42.9million



EMR’s current market cap is $23million so it is undervalued by 66% relative to EGO’s market cap (1-(23million/68.4million)

PCL’s mkt cap is $31 million so it is undervalued by 42% relative to EGO’s market cap ( 1 - (31million/42.9million))

FAR’s mkt cap is $55million and is overvalued by 28% relative to FAR’s market cap. (55 million/43 million)


Of course these calculations do not take into account any of the company’s other projects. Also before the results are released, the above calculations may be irrelevant. As we’ve seen in the last few weeks EGO has become very popular with traders and may continue to be the best of the JV partners leading up to the results. For short term traders EGO may continue to be the best of the JV partners.

However if oil were to be struck, then it should be noted that EMR will clearly give you the best leverage, followed by PCL, EGO and then FAR. There is a significant arbitrage existing at the moment for those who want to have an interest in Canning Basin until results are released.

For those who are holding EGO only for the purpose of results from Canning Basin and Stokes Bay, then you are probably holding the wrong stock.

I wish all investors/traders with a vested interest in the Canning Basin the best of luck.

Cheers

Any thoughts?