AJ Lucas Group

AU: AJL

AU$82.5m market cap

AU$0.11 last close

AJ Lucas has investments in the exploration and commercialisation of shale gas in the UK through licence equity interests and a stake in Cuadrilla. AJL also has two Australia-based operating business units: Drilling Services (LDS) and Engineering & Construction (LEC).

Investment summary

AJ Lucas (AJL) has benefited from a material recovery in profitability from its Australian onshore drilling division, with underlying EBITDA in H119 (31 December 2018) of A$13.1m (17.2% margin), up from A$5.5m (9.7% margin) in the previous year. High rig utilisation and strong coal mine degassing demand support our forecast of revenue sustained at close to H119 levels (A$76.2m). AJL’s track record and tier 1 client relationships support management guidance of FY19 drilling underlying EBITDA in excess of FY18’s A$19.7m (Edison FY19 forecast: A$22.5m). Valuing Lucas Drilling Services (LDS) at 6x Edison adjusted EBITDA (after associated overheads) equates to A$0.15/share or A$0.03/share after consideration of group net debt. This excludes our net P50 UK shale valuation of A$0.91/share. We intend to update our probabilistic value of UK shale based on an improved understanding of key inputs including initial production rate (IP rate), estimated ultimate recovery (EUR) and well costs.

Y/E Jun
Revenue (A$m)
EBITDA (A$m)
PBT (A$m)
EPS (fd) (c)
P/E (x)
P/CF (x)
2017A 122.6 (3.8) (36.3) (6.7) N/A N/A
2018A 127.1 15.4 (16.7) (1.1) N/A N/A
2019E 140.9 18.3 (9.5) (1.6) N/A 4.5
2020E 143.7 17.3 (8.1) (1.4) N/A 8.7
Last updated on 22/05/2019
Industry outlook

AJ Lucas has investments in the exploration and commercialisation of shale gas in the UK through licence equity interests and a stake in Cuadrilla. Central government supports the exploitation of shale gas resource in order to increase domestic energy security and to support intermittent renewable energy sources.

Last updated on 22/05/2019
Sector
Oil & gas
Share price graph
Balance sheet
Forecast net debt (A$m) 104.4
Forecast gearing ratio (%) 82
Price performance
%
1m
3m
12m
Actual (24.1) (31.3) (67.2)
Relative* (27.0) (35.0) (69.4)
52-week high/low A$0.4/A$0.1
*% relative to local index
Key management
Phil Arnall Chairman
Austen Perrin CFO
Marcin Swierkowski Company Secretary

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