Karoon Gas posted a first-half loss in line with the broker’s forecast. The good news is the new chairman has highlighted a need for a clear strategy, to maximise value from existing assets and improve capital management.
The broker is waiting to see if the company might deploy its cash pile in acquiring a producing asset, or buy back shares, but the latter would signal management has run out of ideas. Neutral retained despite the stock trading at a -19% discount to cash. Increased cash and lower costs see the target rise to $1.15 from 95c.
Target price is $1.15.Current Price is $1.02. Difference: $0.13 – (brackets indicate current price is over target). If KAR meets the Macquarie target it will return approximately 11% (excluding dividends, fees and charges – negative figures indicate an expected loss).