Asset Development as FCF base

Block 2B the trigger in Energy

Fair value range of SEK 2.1-4.5/share

Asset Development offers cash flow generation
Crown operates 31,683m2 of leasable area across 16 properties in Angola in its Asset Development and Management segment. The segment is FCF positive, and we expect a gradual rise in the occupancy rate for its important C-View property (construction finalized in Q3’17, 6% occupancy rate today). We forecast ’19-20e EBITDA of SEK 43m-SEK 61m, with near similar FCF at SEK 41m-SEK 60m. The main risk to our estimates is the occupancy rate of the assets.

While the Energy segment offers substantial potential
The Energy segment consists of holdings of four oil and gas exploration licenses; in South Africa, Equatorial Guinea, Madagascar and Iraq, with combined net prospective resources of 2.7bn boe. Dependent on exploration success and/or reduced geopolitical risk, monetization of the assets through divestitures is the likely exit strategy. In the near term, the company’s focus is directed towards the drilling of the Africa Energy-operated (90%) Block 2B in South Africa, which holds gross prospective resources of 376mill boe and in which Crown Energy holds a 10% carried interest. The well is planned to be spudded in Q3’19.

Fair value range of SEK 2.1-4.5/share
Valuing the investment properties in the range of 0.45-1.07x NAV (in line with Nordic peers albeit using a widely different WACC), the service segment at 12.3x-17.1x earnings and the Energy assets on a USD per boe basis with a significant risking related to geological and geopolitical risk, we derive a fair value range of SEK 2.1-4.5/sh. The upside to our range is driven primarily by the company’s ability to enter new projects in the Asset Development and Management segment, as well as exploration success, where commercial discoveries would likely add significant value.

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