Valuation model show undervaluation in comparison with peers Stonegate Capital Partners report:
On a comparable company basis for FY19 estimates, TGA currently trades at an EV/S multiple of 0.6x while its peers trade at an average multiple of 2.2x, and at an EV/EBITDA of 1.1x vs. the average of its peers at 3.9x.
On a P/CFPS basis, TGA trades at 1.4x based on 2019E vs. the average of its peers at 2.3x, and on a 2019E P/E basis, at 5.3x vs. 8.4x. We note that we have added to our 2019 estimates the impairment loss of ~$8.4M.
Additionally, the Company is well-positioned to continue profitability in the near-term based on:
• Execution of a disciplined business plan to drive free cash flow, with a focus on maintaining costs
• A multi-year development strategy for its Canadian assets to ensure stable growth
• Continuing to secure key contracts with the Egyptian government and third-party marketers
• Goal of modernizing and consolidating the Eastern Desert concessions to unlock large oil in place development projects
• Consideration of additional acquisition opportunities in Egypt and Canada
• The Company’s experienced management team, which has successfully steered TGA through difficult periods involving low oil prices
We would expect that investors in TGA could benefit from price appreciation in the upcoming quarters as progress continues to be made, and the stock begins to trade more in-line with the metrics of its peers.