Argonaut Securities have just published a report valuing Salinas...

Argonaut Securities have just published a report valuing Salinas at 80c, vs its current price of 38c. It has a straight Buy recommendation. It values the NAV for North San Ardo at 54c per share and the rest of the valuation is made up of a fairly modest appraisal of risked propsects.

The NAV is calculated using conservative oil price assumptions of $110 pb short-term and $75 pb longer-term. Arganaut's sensitivity analysis shows that if you used a longer term oil price assumption of $100 pb, the NAV rises to 63c per share, an assumption of $120 pb gives an NAV of 79c per share, and hence and overall valuation for the stock of over A$1 per share.

For the forthcoming financial year, Argonaut expects the company to make a net profit of A$21.7m, putting the stock on a PE of just 4x. This does not take into account any of SAEs new project inventory.

With the Paris Valley and San Joaquim projects due to drill soon, there is substantial upside from these valuation figures. However, the stock is very under-valued on its existing production assets and investors should be able to double their money from this point, with virtually no risk.

The reports says "The market has lumped SAE in with other Aussi-based, US focussed E&P companies many of which have been a disappointment. This is unwarranted, but provides an attractive opportunity for investors to get exposure to one of the few US success stories."