Happy spud day!, page-40

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Hi Venman,

I hope the market cap would more than double.

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The average Price/Earnings ratio for sector which Stonehorse resides in, the energy sector industry average is 13.4 according to simply wall street.

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SHE current Price/Earnings Ratio is currently 3.4 or only 25.3 % of the Industry sector average.

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SHE Market capitalization would have to be 3.94 times higher to bring it into line with the industry sector average or 43.1 million. Add its cash holdings to this bring its expected fair value market cap to 53.8 million. This would equate to a share price of 7.8 cents instead of the current 1.6 cents.

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Obviously the price/earnings ratio is only one way of valuing a company, another method is factoring in growth and future discounted cash flows. This is exactly what alpha spread and Simply wall street website have done in their in their calculation of fair value.

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By the way Simply wall street have just upgraded their fair value price /share to from 54 cents to 65 cents using the discounted model, uplift of 20%.

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The new fair value share price of 0.65 divided by the current 0.016 cents share price is a 40 fold increase in share price if Simply walls street fair value were to be reached.

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Now this is where it gets really exciting , Imagine if Stonehorse energy does go ahead with several Certus type wells and the revenue reaches 19 million as per the spread sheet above, what would this do to the fair value share price using a industry sector P/E ratio of 13.4 or using a discounted model.

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Think this can’t happen, well Robert Gardener the Chairman of SHE was also on the board another company that did exactly that a few years ago.

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I guess that we have got so used to SHE depressed price, we downgrade SHE intrinsic value.

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I just hope they don’t dilute with an appendix B.

Caveat

I am a nonprofessional hence the above are my personal and nonprofessional views of Storehouse fair value and what it could go to. Do your own research and use your own judgement.

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There is now law saying market prices have to track fair value fortunately as this allows us to profit from undervalued companies.