After Woodside’s decent recent run ($19-$24, from the lows) it nonetheless remains the case that the long run earnings trajectory required to produce a 7% CAGR, derived from decapitalising the implied market cap, at a variety of different PEs, and visually compared to history, appears eminently achievable.
There’s a lot to unpack in that sentence, but it is the key to understand the graph, and the net takeaway is that Woodies is still very cheap, to our minds.
With the BHP petroleum assets merger (near term highly cash generative assets) the longer run WPL growth options (e.g. Scarborough, ongoing development of the Sangomar fields, in Senegal) are:
b) much easier to monetise at present which produces
c) the likelihood that earnings surprise to the upside relative to the low hurdle of expectations.
We’ve been maximally long energy in our direct equity portfolios (at ~8% overweight) a trade that has worked spectacularly well over the past quarter, and find that WPL, at the least, still reflects good value.
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