Intermarket Pulse: POL: Earnings growth largely hinged on oil prices
- We lift our FY17/18 EPS estimates for POL by 6%/1% following higher than expected 9MFY17 results and recent finds in Tal block. Our Jun’18 TP is PkR480/sh and we are Neutral on the stock. Its FY18F dividend yield of 11% remains a key attraction.
- The 41% YoY jump in FY17F earnings is majorly led by about US$10/bbl higher oil prices and partly due to the addition of Mardankhel in 2HFY17. We expect a similar jump in earnings in FY18F; our oil price assumption is US$60/bbl, which will be complemented by increase in production from Tal block.
- The stock is trading at an FY18F EV/EBITDA of 4.8x and P/E of 9.2x, at a slight premium to peers, which is not supported by its low reserve life of 8 years and passive exploration strategy. Upside triggers include (i) large discovery, (ii) higher oil prices, and (iii) retrospective pricing application on recently converted fields.
Co. and its subsidiaries are principally engaged in the exploration, drilling, production and sale of crude oil and gas and other products.
Intermarket Securities Limited (IMS) is a full service corporate brokerage firm based in Karachi, Pakistan. We service both domestic and international clients. IMS was ranked #2 Best Local Brokerage and #3 Best for Overall Country Research for 2016 by AsiaMoney.
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