Fortune Oil''s China Gas Stake Underpins Valuation

Shares in Fortune Oil are a compelling proposition, reckons Oriel Securities.

“The shares are trading at a c.45% discount to the see through value of expected net cash and the stake in China Gas, with no value attributed to the on-going business,” the broker argued, as it reiterated its ‘buy’ recommendation in the wake of Fortune’s interim results.

The results confirmed Fortune will seek approval from shareholders for a special dividend of 2.36p a share, and a waiver from Rule 9 of the UK Takeover Code for a general offer to be made for the company by persons owning more than 56.9% of the company.

Net assets increased 32% to £327.4mln following a further appreciation in Fortune’s investment in China Gas Holdings. Net debt at 30 June 2013 stood at £69.3mln, versus debt of £61.1mln at the end of 2012. The group does not envisage any difficulties meeting loan repayment obligations or investment commitments, the broker notes.

(proactiveinvestors.co.uk, edited by Topco)