Valuation: increasing risked NAV by 10% to C$2.21/sh; 15% FCF yield
At its current share price of C$0.84/share, ALV is trading on a 44% discount to our core NAV of C$1.49/sh, which only includes the value for the development of the 2P reserves at Cabur and Gomo. There is 160% upside to our risked NAV of C$2.21/sh, which includes the value for development upside, potential tolling revenues and two exploration prospects plus Gomo exploration. We estimate that Alvopetro is trading on just 3.5x EV/EBITDA in 2021, with a ~15% FCF yield. ALV's base case scenario (assuming 50% of FCF goes towards financing costs, debt repayment and dividends) sees it paying around its current share price in dividends by 2029 without any upside factored in from US$82mm allocated towards re-investment. This cash flow is available for growth investment (e.g. Gomo development) or could go towards further shareholder returns.