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Gold/Mining/Energy : News Flash On The Aim Market
LSE 5.220-0.8%Nov 7 9:30 AM EST
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From: miningoz5/1/2014 4:39:20 PM
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Goldman on Afren We believe Afren fits these criteria.

Afren’s shares have fallen 8% YTD, a move that we believe was largely
driven by mean reversion rather than any fundamental change in the value
of the company. On the contrary we see several data points YTD that are
highly supportive to Afren’s investment case. Specifically the recent inflow
of capital into Nigeria, with EIG’s $1.6bn bid for Heritage Oil today (April 30)
and Seplat’s $500mn IPO in April, valuing the company at $1.9bn. Also, with
Afren confirming at FY results its pioneer tax status on Ebok and on-time
development of growth projects in Okoro, Ebok and Okwok, we continue to
believe the company is very well positioned. Reiterate CL Buy.



We see three key catalysts that will likely drive Afren’s shares over the next
12 months: 1) M&A – we see significant asset disposal opportunities for
Afren in Nigeria (Ogo) and Kurdistan (Ain Sifni, Barda Rash), 2) growth – we
expect production to ramp back up rapidly in 2015 as the Okoro, Okwok and
Ebok developments come onstream, and 3) valuation – recent performance
of the Integrated oil sector demonstrates significant demand from investors
for stocks that are at a discount to the market with signs of an improvement
to their underlying business. Afren is trading on 4.2x 2014E EV/DACF, going
to 2.9x in 2015E a c.65% discount to the EU market. In the near term we
believe the recent pick-up in M&A activity in the sector will be supportive to
share prices, particularly for funded companies with high quality assets and
attractive valuation. We believe Afren fits these criteria.

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