There are clearly attractions to the SOCO International (SIA) investment case. Were there none, it seems unlikely Kuwait Energy would have just tried to back into the company via a reverse takeover. SOCO rebuffed that pitch on 5 March after the parties failed to agree terms, and so must now prove it can make good on a strategy to “build a growth-oriented E&P company of scale”.
The track record, as 2017 results show, is less than convincing. Costs ticked up, production at the key TGT field in Vietnam fell, and could decline again this year depending on partner commitments to the drilling programme. And while the group lauds the $476m (£338m) it has returned to shareholders since 2006, the reality is that a holding over this period would have yielded a 37 per cent negative total return, were all dividends reinvested.
Indeed, SOCO’s self-image as an effective steward of capital should also be seen against a $220m impairment of African exploration assets, largely capitalised in the 2017 year-end balance sheet, and which explains the sharp negative swing in the bottom line.
Consensus forecasts are for adjusted pre-tax profit of $46.5m and EPS of 4.6¢ this year, compared with estimates of $19.3m and negative 0.7¢ for 2017.
| SOCO INTERNATIONAL (SIA) | ||||
| ORD PRICE: | 99p | MARKET VALUE: | £328m | |
| TOUCH: | 98-99p | 12-MONTH HIGH: | 150p | LOW: 88p |
| DIVIDEND YIELD: | 3.8% | PE RATIO: | na | |
| NET ASSET VALUE: | 149¢ | NET CASH: | $112m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2013 | 608 | 333 | 31.7 | nil* |
| 2014 | 448 | 153 | 4.3 | nil* |
| 2015 | 215 | 8.2 | -10.3 | 2.0* |
| 2016 | 155 | 21.9 | -1.3 | 7.0 |
| 2017 | 156 | -130 | -47.7 | 5.25 |
| % change | +1 | - | - | -25 |
| Ex-div: | tbc | |||
| Payment: | tbc | |||
| £1=$1.41. *40p was returned to shareholders via a share scheme in Oct 2013 (22p in Oct 2014), and a 10p cash return was paid in Jun 2015 | ||||
