In a report titled Land of Plenty: Quality Inventory + High Growth Focus Should Bode Well for Investors, Raymond James’ Jeremy McCrea initiated coverage of Logan Energy Corp. with an “outperform” rating and $1.50 target. The average is $1.74.
“Over the past decade, we have observed a limited number of management teams that can point to a track-record of M&A success and a capacity to generate meaningful value for shareholders,” he said. “With insiders owning 21 per cent of the company, and a goal of growing production 50 per cent per year (for the next several years), there is considerable alignment for growth oriented investors. Operating solely within the Montney, where scarcity of high quality assets have become more apparent (given recent land sale bids/transactions), Logan possesses 500+ identified Montney locations across 300+ net sections of land. Although LGN looks relatively ‘expensive’ on traditional valuation metrics (EV/FCF, EBITDA, etc), thus lies the opportunity. For ‘land exploration’/’early stage’ companies, the high growth potential should be looked at through a different lens, via establishing the value of what investors might/should pay for Logan’s undrilled Montney acreage. Taking the EV less PDP, investors are currently paying $425-million for LGN’s undrilled land today. Part of the leap we think investors will need to take (and risk), is how modern frack designs will change type-curve economics (with most of LGN’s land not seeing a well drilled for 5+ years now). Nevertheless, based on off-setting competitor results, we believe investors are likely paying for less than 10 per cent of Logan’ inventory today (much less than many of its peers). If Logan is able to execute and successfully showcase well results utilizing modern day completion technology, we think there is more upside than what the current share price shows. Overall, with a positive starting cash balance, an experienced management team, and plenty of growth and inventory ahead, we initiate coverage with an Outperform rating.”