Clare Capital uses the Enterprise Value/2P reserves ratio to give an indication of how the market is valuing a number of New Zealand and Australian comparators in the oil and gas exploration and production industry (as at 22nd September 2016). Companies with an EV less than NZ$20 million are excluded (such as Pan Pacific Petroleum).
The graph above highlights three values of each company in the Australasian Oil & Gas (O&G) Industry:
- Enterprise Value of the O&G company / Amount of latest reported 2P reserves [vertical axis]
- Amount of latest reported 2P reserves [horizontal axis]
- Enterprise Value of the O&G company [size of the bubble]
Green colouration denotes companies with New Zealand operations, while blue colouration represents Australian only operations. The closer a company is to the horizontal axis, the ‘cheaper’ its market valuation.
Clare Capital was the financial adviser to NZX Limited on the sale of their online news business, NewsRoom to Sublime Group Limited after NZX conducted a strategic review of options for the business.
NewsRoom is a subscription-based online news service which sends unfiltered press releases, announcements and opinion material to paying subscribers. NewsRoom was established in 1996 and was acquired by NZX in 2007. It’s news feeds serve New Zealand’s top legal and accounting firms, large corporations, government departments, and parliamentary offices.
NewsRoom draws their material from three different sources; free content supplied by organisations and individuals, purchasing content from specialist providers and a designated in-house NewsRoom team creating content on key political stories. Subscribers receive their information via NewsMail (email), intranet feeds and website feeds.
We produced a Thought Piece on our take on Xero’s valuation at the beginning of October 2013, before the US$150 million capital raise and when the share price was trading at $19.00. Three months later the share price is now at $42.00.
The Executive Summary of the Thought Piece is highlighted in the bullet points below:
- Xero is a high-growth technology company and not a Ponzi scheme.
- Losses are fine as long as value is being created.
- However – from a fundamental valuation perspective Xero is a challenge. First – there are a wide range of future potential growth scenarios. Second – we don’t know when Xero will move to being cash flow positive. From patient for profit and impatient for growth – to the reverse.