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Revenues at USD 81m vs. Arctic and Nordic consensus at USD 90-95m Quality of revenues solid with late sales at USD 61m – up 10% vs. Q2 2020 Negative revenue revisions about to through – down 50% since February Downside protection with sustainable div.yield at 4.5% and P/B at 1.0x
Companies: TGS ASA
Arctic Securities
The current pessimistic sentiment towards oil and gas reflects a similar degree of optimism regarding renewable energy. While the transition clearly has begun, fossil fuels still deliver 85% of the world’s energy supply. The transition to a green energy base will take decades and we feel investors underestimate the complexity. With more realistic consensus estimates, and a sustainable dividend yield of 4-5% we upgrade the stock to Buy (Sell) – target NOK 125 (120)
We reiterate Sell with a new target of NOK 120 (130). Revenue revision has been negative post Q2 and we believe this trend will continue. While we expect 2H 2020 revenues of USD 196m, consensus is at USD 241m. Furthermore, 2021 estimates appear high as we do not believe TGS will be able to replace the 2020 backlog, which we believe will become evident over the next months. On 2020/21 numbers, we find no valuation support on FCF, P/E or EV/EBIT
Revenues of USD 96m in line with pre-announced numbers EBIT of USD –84m (USD –36m excl impairment) – Arctic at USD -26m Backlog USD 98m vs. USD 160m end Q1 – supports a weak market Share to trade largely in line with other energy stocks
Q2 revenues USD 96m vs. Bloomberg consensus at USD 98m Pre-funding revenues “saves” Q2 with USD 38m (40% of revenues) Pre-funding revenues to dive in 2H owing to much lower investments Late sales USD 54m vs. Arctic at USD 50m – down almost 70% from Q219
We change our recommendation to Sell (Buy) following a +50% share price gain. We fear that the market perception among investors over the next six months will become weaker triggered by quarterly revenues significantly below consensus. We acknowledge that TGS is a survivor and that some may look beyond ~18 months with terrible earnings, but investors should be able to buy this quality name at lower levels. Our 2020/21 revenue estimates are down ~16%
Pre-funding and late sales revenues in line with pre-announced figures EBITDA inline, EBIT of USD -19m (CS USD 13m) and net profit at USD -27m FCF negative USD 21m or NOK 2 per share (neg NOK 7/share ink divi) Highlights very challenging market conditions – estimates at risk
TGS is one of very few oil service companies that we believe will deliver a solid FCF yield in 2020, which clearly supports the new dividend level. Although our 2020 revenue estimate is 38% below the 2019 level, TGS will manage to deliver a FCF yield of almost 7%. In 2022 the FCF yield is forecasted at +10% even with a revenue estimate 22% below 2019 levels. We reiterate Buy with a target of NOK 180 (190). The stock trades 50% below historical average on P/B.
Q1 revenues of USD 152m vs. consensus at USD 162m Quality of earnings weak with late sales at USD 65m – down 48% YOY 2020 mc spending guidance USD 325 (previous USD 450m, Arctic 350m) Q1 dividend USD 0.125 vs. previous guidance 0.375
Q1 revenue update Wednesday morning – Arctic in line with consensus We expect dividend reduction – USD 0.2/quarter vs. guidance at 0.375 New mc 2020 guidance expected at USD 350m (current USD 450m) Bearish market comments expected – TGS in a unique position, though
TGS is in a unique position vs the majority of other oil service companies. Firstly, the company has a net cash position above USD 300m and secondly TGS has a flexible business model which can be trimmed immediately towards a brutally low activity level and still deliver positive FCF. As such, TGS is a survivor. We cut our estimates considerably and lower our target price to NOK 190. We reiterate Buy supported by an all-time low P/B and strong FCF support.
Edison Investment Research is terminating coverage on Tiger Resources (TGS). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant.
Edison
On 10 January, Tiger announced that it had achieved production for FY16 of 23,119t of copper cathode. While this was within updated guidance of 23.0-23.6kt, it was below earlier guidance of 25.0-26.5kt after a number of setbacks curtailed output. While 2016 therefore witnessed management fighting a series of metaphorical fires, an elegant solution to the central metallurgical problems, utilising the newly established tank leach capacity from the earlier de-bottlenecking exercise, has stabilised
Centamin | Minera IRL | Nyrstar | Vast Resources | Tiger Resources
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SP Angel
Research Tree provides access to ongoing research coverage, media content and regulatory news on TGS ASA. We currently have 3 research reports from 4 professional analysts.
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