Niko Resources Ltd NKRSF

RE: Why is Niko Down 20% From Recent High ??

[SurfForWealth]

We are holding numerous O&G stocks ranging from junior to large cap. The large caps have held up better with ECA hitting a new 52 week high a couple days ago & TLM down about 5% from the high. With our intermediates, PKZ is down 20%, POC.SV.B is down 23% & NKO down 19%. My junior TUI is down 24% and SLG is off 8%. There is this huge debate about the future of O&G pricing and the supply/demand equation moving forward. I read the annual report for TLM last night and they wrote in the report that they expect CF of about $10 for FY2005 (Dec). A share price of $41.67 gives them a current year CF multiple of only 4. It is a much safer predictable bet to hold TLM at that multiple. The smaller guys have much higher growth rates and often longer RLI's but there is so much more uncertainty and the current multiples tend to be much higher. When the market gets nervous about the sector the riskier plays get hit harder. There is much better institutional support for the bigger players. BTW CUX is down 25% and is similar to NKO in many ways. We sold half our NKO at higher prices to rebalance and we might buy some back if the price gets beat down enough and we have the cash. Perhaps NKO and some other share prices were getting ahead of the fundamentals. I think we work through this correction and then move on to new highs down the road...perhaps gradually. We should see some fabulous earnings this year from this sector. Cheers!!!