Arden now rates ADM as a ‘buy’ with a price target of 10p, which compares to a current market price of around 5.4p.
This blue-sky view of ADM is based on the anticipated Phase 2 development of the Aje field with Arden analyst Daniel Slater highlighting that the project promises to significantly increase cash flow.
Slater also notes the possibility of “portfolio augmentation” which could see new assets brought in to drive further growth.
Partnerships with commodity trader Trafigura and Dubai Bridge Investments may support this phase of new growth, the analyst added.
“ADM has ambitious plans to grow its asset base, based on the ongoing Nigerian marginal fields licensing round, and asset M&A across West Africa. This could provide fast growth for the asset base on success,”
Slater added: “There is potential to deploy funds on both Aje development and new assets, underpinning the company’s twin growth strategy.”
Arden sets a net asset valuation of 10.1p – of which 8.3p is ascribed to Aje Phase 2 – but no credit is yet given to any potential new project or opportunity, though Slater says this potential would represent a large proportion of the investment case.
“We expect a busy year for ADM in 2021 as the company pursues its Phase 2 Aje development and sets about bringing new assets into the portfolio,” the analyst said.