AWE Shares Surge After Rival Takeover Bid from Mineral Resources

Validea Peter Lynch Strategy Daily Upgrade Report - 12/9/2017

Shares in AWE Ltd  (AWE.AU) surged 14% on Monday after the Australian oil and gas explorer received a take over bid from mining services firm Mineral Resources (MIN.AU), trumping a rival bid from  Chinese state-owned China Energy Reserve & Chemicals Group.

Under the all-stock proposal, Mineral Resources will issue one share for every 22.325 AWE shares held, valuing the target company at AUD0.80 a share, trumping a revised cash offer of AUD0.73 a share on Friday from the Chinese energy giant.

In a statement the AWE board advised shareholders to take no action while it evaluates both bids.

Shares in Mineral Resources slumped 4.7% on the news.

RBC Capital Markets analyst Ben Wilson says it validates their view that the market has underestimated the value of AWE’s Waitsia conventional gas resource in the northern Perth basin:

We see the second bid for AWE by Mineral Resources of A$0.80/share as further external validation of the appeal of the Waitsia conventional gas resource. We think these bids for AWE come at an opportunistic time with AWE trading at a discount to our risked DCF valuation of A$0.91/share (A$1.13/share unrisked) due in part to the market’s reluctance to attribute value for the Waitsia resource despite strong flow test results and a significantly upgraded resource size

Wilson has an outperform rating on AWE with a risked discounted cash-flow valuation of AUD0.91 per share.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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