Factored into this analysis are reports from ABN Amro, and...

Factored into this analysis are reports from ABN Amro, and Wilson HTM as well as Sydney Gas revenue reporting over the last 12 months.

QGC has a market cap of around $85 million (May 03 - $24 million)

In terms of reserves it has reported – PPP of 254 million GJ.

Given a Gas price of between $2.00 to $3.00 per GJ, this equates to revenues of $508m to $834m.

If QGC did not discover anymore resources over the next 15 years, it has the potential to earn annual EBIT of $6.77m to $11.12m based on a 20% gross profit margin.

Assuming a PE of somewhere between 13x (Average for All Ord) to 20x (Average for sector), the market value can be calculated at between $88m to $135m (based on $6.77m annual EBIT) to $144 to $222m (based on $11.12m annual EBIT)

You can complete this valuation baseline by calculating discounted cash-flows. However, it is likely that the resource prices will rise over the next 15 years and it is also reasonable to expect QGC to discover more Gas.

In conclusion, either QGC is fully priced at 45c a share or it is going to be a $1.5+ share in the future. Also, there is no comparison with the fixed costs of SGL. The recently announced QGC management bonuses are quite humble compare with SGL.


I welcome your thoughts.