Thursday, April 27, 2023
Michael Heim, Senior Vice President, Equity Research Analyst, Energy & Transportation, Noble Capital Markets, Inc.
Refer to the full report for the price target, fundamental analysis, and rating.
CEO/P Mehran Ehsan made a presentation at the Planet Microcap Showcase on April 26. The short, ten-minute presentation largely restated the company’s case that there is a disconnect between its asset value and its stock price. Mr. Ehsan once again pointed to a reserve study of its properties that values its properties at $428 million using a 10% discount rate versus the stock’s current enterprise value of $9 million. If one were to value the company based on just proved reserves, the value would still be $128 million. In fact, the value from only wells currently producing is $12 million, still above the current market capitalization.
Management believes the disconnect stems from its listing on the OTCQB exchange which limits manager investments in the company. The company has dropped plans to list on the New York Stock Exchange and now plans to list on the NASDAQ exchange. We believe such a move is prudent and that it will help reduce the valuation disconnect. This is especially important given Permex’s need for capital to drill out additional wells. Along those lines, management indicated that it plans to convert a vertical well drill last fall to a horizontal well. The drilling will use $1.1 million of the $1.67 million in cash on hand and take a few months to complete.
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