Woodside Petroleum Ltd

WPL Details

2020 AGM Highlights: Woodside Petroleum Ltd (ASX: WPL) is a leading natural gas producer in Australia with a global presence, recognised for its world-class capabilities. On 30 April 2020, the company held its 2020 Annual General Meeting (AGM) with the assistance of video and teleconferencing technologies. At the AGM, the Management of the company highlighted its FY19 results and gave assurance that the company’s disciplined approach to capital management has positioned it well to respond to the extraordinary circumstances that have unfolded around the world in recent months. The management also informed that in response to COVID-19, the company has expedited payment terms for small, local and indigenous businesses, bringing forward millions of dollars in payments.

Decent Performance in Q1FY20: On 16^th April 2020, the company provided an update on Q1FY20, wherein, it informed that its total production for the quarter totaled at 24.2 MMboe, up 12% on pcp. During the quarter, the company’s sales volume as well as its sales revenue were impacted by reduced trading activity and lower prices.

In Q1FY20, the company made solid operational progress on its near-term growth projects taking FID on Sangomar Field Development Phase 1 in Senegal and the North West Shelf’s Greater Western Flank Phase III. Over the quarter, the company also made significant execution progress on Pyxis Hub and Julimar-Brunello Phase II.


Sales Volume and Revenue Summary (Source: Company Reports)

Covid-19 Situation: In response to the impact of COVID-19, WPL is implementing strategies to reduce the risk of transmission of COVID-19 to Woodside’s people, contractors and communities and its potential impact on Woodside’s business. In addition to this, the company is making changes to its 2020 work plan resulting in ~50% reduction in the forecasted 2020 total expenditure.

What to expect: WPL’s total expenditure for 2020 is expected to be around US$2,400 million. The company has recently revised its FY20 investment expenditure guidance to US$1,700 – US1,900 million. The company’s production guidance is unchanged at 97 MMboe – 103 MMboe.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Relative Valuation Approach (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: In the past three months, the stock of WPL has corrected by around 39.69% on ASX and is currently inclined towards its 52 weeks low price of A$14.930, offering a decent opportunity for accumulation. We have valued the stock using EV/EBITDA multiple based illustrative relative valuation method and have arrived at a target price with an upside of lower double-digit (in percentage terms). For the said purpose, we have considered Origin Energy (ASX:ORG), Caltex Australia Ltd (ASX: CTX), and AGL Energy Limited (ASX: AGL) as peers. Considering the company’s resilient performance in Q1FY20, decent FY20 guidance and current trading levels, we give a “buy” recommendation to the stock at the current market price of $22.450 on 30 April 2020. 

 
WPL Daily Technical Chart (Source: Refinitiv, Thomson Reuters)
 

Perenti Global Limited

PRN Details
 
COVID-19 Update: Perenti Global Limited (ASX: PRN) is a diversified global mining services group with interests in surface mining, underground mining and mining support services. As per the company’s update on 15 April 2020, it has witnessed no material financial impact from COVID-19 related interruptions across its global operations, so far. However, due to the uncertainty regarding the COVID-19 impact, the company has withdrawn its FY20 guidance of $115-$120 million underlying NPAT(A) and has elected to defer the payment of its HY20 interim dividend of 3.5 cents per share (totalling $24 million) until 20 October 2020. Recently one of company’s Director, Terrence John Strapp, acquired 29,375 securities of the company for a consideration of $19,249.44.

Temporary Suspension of Operations at Savannah: The company recently noted that Panoramic Resources Limited (ASX: PAN) has temporarily suspended the operations at the Savannah Nickel Mine in Western Australia. Perenti’s subsidiary, Barminco, had signed an agreement in February 2020 to undertake mine development, production and haulage at Savannah. Barminco is currently owed approximately $7 million from Panoramic, and there is no dispute that this amount is payable.

H1FY20 Performance: In the first half of FY20, the company delivered a strong result with revenue of $1.0 billion, up 5.3% on pcp, and underlying EBITDA of $222.0 million, up 10.6% on pcp. The company’s results were underpinned by the strong performance in underground mining and solid surface mining result in Australia. 


H1FY20 Results Summary (Source: Company Reports)

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Relative Valuation Approach (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: Currently, the company has a strong liquidity position with cash reserves of circa $315 million and circa $115 million in undrawn revolving credit facilities. We have valued the stock using EV/EBITDA multiple based illustrative relative valuation method and have arrived at a target price with an upside of lower double-digit (in percentage terms). For the purpose, we have taken peers like Imdex Ltd (ASX: IMD), MACA Ltd (ASX: MLD) and Macmahon Holdings Ltd (ASX: MAH). Considering the aforesaid facts and decent H1FY20 results, we give a “Speculative Buy” recommendation on the stock at the market price of $0.910 as on 30 April 2020. 

 
PRN Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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