Top Gainer: Linc Energy (LNC)

 Closing price  $2.25
 Change  +0.275
 % change  +13.9%


Broker calls

Atom Funds Management – BUY

Austock – BUY

Madison Williams – BUY, $3.50 price target

Patersons Securities – SELL

Aussie shares recovered some of their losses on the back of Wall St’s surge yesterday, which saw shares rocket over 4% in the last hour of trade. None more so than Linc Energy, which rocketed 13.9% to be the day’s biggest gainer. It beat a host of other beaten down miners, including Iluka (+12.4%), Panoramic (+9.8%) and Aquila (+9.0%).

Linc Energy is one of Australia’s leading clean coal companies, using a combination of underground coal gasification (UGC) and gas to liquid (GTL) technologies. “Linc Energy has proven the combination of two technologies,” says Linc. “Together these technologies have the potential to economically convert ‘stranded’ coal, from deep underground, into ultra-clean liquid fuels…with these technologies, Linc Energy is set to become the leading producer of cleaner liquid fuels and other associated products.”

George Raftopulos portfolio manager with Atom Funds Management is keen on pure commodities plays like Linc Energy. “Given that the long-term fundamental view remains bullish, the safest way to play resources is having an eclectic mix of large low-cost operators with good resources and strong infrastructure,” says Raftopulos.

Austock securities analyst Craig Stranger also has a buy on LNC. Stranger notes that LNC has recently bought 80% net revenue interest in an Alaskan oil field for US$50m and is planning to spend several hundred million on infrastructure and drilling to produce 50,000bpd of oil within 5yrs. He highlights that Santos has a market cap of $12bn and produces 60,000bpd, so this is no small thing.

“As you would expect purchase cost at US$0.25/ bbl 3P is low, and target field is very large 1,000mboe,” says Stranger. “This is a “long term, high risk” development opportunity that relies on extrapolating results from existing oil producing wells (British Petroleum) 140km away, Alaskan Government building infrastructure (road), working with other emerging oil produces (pipeline) and weather.”

Stranger also points out that one key risk – development within the National Petroleum Reserve – was recently approved by US Government. “The key drivers to LNC’s share price in short term are the sale of Teresa Coal (approximately $500m), and generating enough cash flow from US Gulf oil producing assets to be breakeven while spending $70m pa on energy development across the group,” he said in a research note.

Asit Sen from Madison Williams is also bullish on the stock, with a price target of $3.50. “We view the recent indiscriminate selling as a buying opportunity for long-term investors,” he notes. “While we continue to expect near-term macro headwinds, we like Linc Energy’s risk/ reward profile (upside $3.50/downside $1.75).” Sen points out that Linc has over 22 million acres of oil/gas/coal leases in Australia and the US. “In addition, the active exploration program in Arckaringa Basin in Australia could unlock significant value,” he says. You can read Madison Williams full report here.

Based on Thomson Reuters data, four analysts have a buy on LNC, with no holds or sells (four brokers). 


Stock code: LNC

Charts: Linc Energy Limited

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Investor Centre: Linc Energy Limited


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