13.05.2019 kl 16:32 2625

The stock is still considerably undervalued, with the FCF yield (ttm) of 11%, EV/2P of 5.4x, and EV/Production of 23.2x.

DNO ASA (OTCPK:DTNOF) (OTCPK:DTNOY), Norwegian E&P company, which has fundamentally recalibrated portfolio this year, presented its Q1 results. The figures were generally inspiring, though not without slight disappointments, such as increased lifting costs, lower netback, and negative quarterly FCF. Despite increased EPS, revenue, EBITDA, and operating cash flow, the market capitalization went into a tailspin immediately after the earnings announcement; the market dragged DNO ASA down by ~12%. In my view, this downward plunge is not justified; the response was partly caused by the full-scale trade war concerns and recent Brent correction that rattled markets anew.

In the previous article, I highlighted DNO's abundant FCF, low trading multiples caused by the market's risk aversion, and unquestionable growth prospects. After reading the Q1 report, I am still confident that DNO deserves a higher valuation.

I believe the market is about to re-evaluate DNO and give it the appreciation it truly deserves. Though I do acknowledge that it will not immediately decide to grant the company a P/E of at least 10x, for instance; it might take time. (On May 10, 2019, DNO ASA had a P/E ratio of 5.3x)
The most apparent catalyst I see is a possible success in the Baeshiqa license in the KRI. If DNO together with its partners makes a discovery, the market might react positively, pushing trading multiples higher.
Redigert 13.05.2019 kl 16:43

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