“The company is focusing on proven technical and commercial models within niche or developing markets,” said Brendan Long.
Pitched at 2.1p this valuation suggests the share could be worth double its current market price of 1.05p.
“We believe the company is well positioned to capture value accretive opportunities and we expect 2021 to be an opportunity rich period for the company,” WH Ireland analyst Brendan Long said in a note.
“Scirocco’s strategy is intended to allow the company to grow flexibly over time in step with the capital at the company’s disposal.
“Based on the pipeline of opportunities within the company’s new area of focus, the company is targeting an enterprise value invested asset base of £150mln capable of generating cash flow of circa £20mln per annum, within five years.”
WH Ireland’s valuation comprises 1.8p per share representing the company’s interest in the Ruvuma gas project in Tanzania, along with 0.2p representing its shareholding in () and 0.1p for the group’s cash.
It does not yet include any contribution for the group’s planned investment and growth strategy.
Long provided some insights into the company’s acquisition criteria and plans for funding the opportunities in the future.
“Most of the targeted strategies would generate stable revenues allowing for the use of financial leverage (debt) to increase equity returns,” the analyst said.
“The company is focusing on proven technical and commercial models within niche or developing markets. The company intends to avoid entering the most mature markets where bidding pressure for assets is likely to erode shareholder returns.”
“The initial acquisition targets are intended to minimise operational risk.
“The company’s plan is to build a balanced portfolio of operational assets and developments over time, balancing the different risk profiles. The company intends to optimise the use of financial leverage at each stage of portfolio development.”
Read More: Scirocco Energy Plc is positioned to capture value opportunities