Santos shares tick up after Morningstar lifts fair value estimate 9%
Make us a preferred source
Make us a preferred source on Google
The news: Oil and gas producer Santos saw its shares lift after Morningstar analysts lifted their fair value estimate on the stock after a consortium led by ADNOC’s foreign investment arm XRG walked away from a $36 billion acquisition bid.
The numbers: At 12:00pm, shares in Santos were up 1.04% to $6.82. They had tumbled 11.9% during the previous trading session.
Morningstar lifted its fair value estimate for no-moat Santos by 9% to $10.50.
The context: On Wednesday evening, ADNOC chair Sultan Ahmed Al-Jaber sent a letter to Santos to end acquisition talks, a few days out from a binding bid deadline amid disagreements on the allocation of risk between XRG and Santos shareholders.
Now that the deal is dead “Santos can now refocus on the business of producing oil and gas profitably”, Morningstar senior equity analyst Mark Taylor said.
The fair value estimate now reflects the standalone business. It had previously been valued at the midpoint between the standalone fair value and the proposed XRG bid price of $8.65 per share.
What they said: “Santos has attractive growth options and the balance sheet to invest in them: gearing is just 26% and net debt/EBITDA is 1.3. Projects expected to deliver a 30% increase in production by 2027 are tracking to plan,” Taylor said.
The source: Morningstar research
