Reply to thread

Comments Re: GREENY's analysis. (I PENNED THIS PRE THE ABOVE POST)

Looks reasonable.

WACC looks spot on and cannot disagree violently with the WTIS/AUDUSD assumptions

The net profit margins in the model are very conservative; but in lieu of continued exploration success, the 16 times multiple for 08 earnings could be a touch high.

While ROC is an excellent explorer a lower PE may be more appropriate for conservatism. They have reserves of about 5 years of production in reserve. Of course, they can uplift a lot of this with drilling success.

In any case, I reckon they could do NPAT of ~$100m (with $50m of exploration expense) in 2008

Using 10 times, (a round number, not scientific), you get a $1bn cap or $4.62 - with a present value  of about $3.35 per share (9%). Not a bad base case and this aligns with some broker NPVs.

Angola (and other expansion) is not included in this and ROC have some massive expectations for this prospect.

From the research I have at-hand, analysts are not having a hard time getting a figure of $0.50-$0.70+ per share for exploration upside out of ROC in excess of their DCF vals.

This is giving 'price targets' in excess of the current price.

The US driving season usually gives the oil price a wriggle-on (they are the only oil consuming nation in their mind) so the underlying momentum could be great for ROC getting traction if they hit a solid oil column in Angola

I would note that I am an "Oil Muppet" and are far better placed to comment on base metals!