UBS Analyst: Suncor Presents Buying Opportunity

Despite the fact that he expects Suncor Energy Inc. (SU) to reduce its full year oil sands production guidance along with second quarter results, UBS analyst Andrew Potter remains very bullish on the integrated energy company. He rates the stock, which has declined 17% in the past month, a “buy” with a C$82.50 price target. This represents upside of more than 40%.

Not only have “regulatory and reliability issues” sent Suncor shares down 25% from their mid-May high, based on UBS pricing, it is now trading at a 42% discount to its 5-year average price-to-earnings per share multiple, Mr. Potter told clients. From a net asset value per share basis, Suncor is trading at just 74%. This implies no value for its Voyageur oil sands project, the analyst added.

These are some of the reasons Mr. Potter sees a “very compelling buying opportunity” in Suncor. As the company shows more reliability in the second half of 2008, he expects the stock will climb to a normal valuation.

As for the sector as a whole, the analyst expects strong commodity prices to drive another strong financial performance in the second quarter. He is forecasting cash flow per share to climb 24% year-over-year for senior explorers and producers, with earnings per share rising 66% for integrated names. 

Comments

[sickofthehype:]

Nice call jackass.

2008 Nov 16 06:26 PM