Cairn Energy: Recent Share Price Decline Provides 80% Upside
- Unwarranted asset freeze by Indian tax authorities, unsuccessful investment in Greenland as well as material capex expected on further development projects has caused 50% decline in share price.
- With further capex directed towards soon-to-be-monetized assets and pressure on Indian government to revert retrospective tax, investors seem to be overestimating Cairn's problems.
- Cairn Energy is currently trading at 30% below its net current asset value comprised of cash and listed holdings in Cairn India. Debt is negligible.
- Adding the value of booked reserves and attaching zero value to any other development projects, would indicated total intrinsic valuation of $2.9bn, an 80% upside from current market cap.
- Management has a great track record of shareholder value creation over the last 20+ years.