Macquarie says Karoon worth $5.15 if oil > 100, page-4

An interesting update from Morgans last week…………..

Investment view
"Despite the material steps Karoon has taken to de-risk and advance its growth strategy the market continues to only price the stock on current earnings. We base this on Karoon looking modestly undervalued if you ignore its growth profile (1H22 placing it on an FCF yield of 6.5% and EBITDA multiple of ~4x).

If Karoon’s share price remains unchanged these numbers will surge to >30% FCF yield and ~2x EBITDA by FY24 (assuming a Brent oil price of US$66/bbl)Karoon has already removed a key risk by having almost fully contracted the workovers/Patola program, securing capex.

This leaves us with the view that it is only a matter of time before the market starts to re-rate Karoon, as it moves to value the stock on >30kbopd production instead of its current ~13kbopd. In the absence of such a re-rating we would view Karoon as a prime takeover target holding exceptional corporate appeal. Karoon offers high-margin pure oil exposure."