Shares in emission reduction and clean energy projects developer Camco (LON:COA) are trading at an unwarranted discount to fair value, according to recent research by KBC Peel Hunt.
In separate research notes at the end of September KBC analyst Andrew Shepherd-Barron looked at Camco’s new joint venture with the Malaysian government and at interim results.
On 27 September Camco announced a tie-up with Khazanah Nasional, the Malaysian government’s investment arm, to replicate its business model in the country.
“Camco’s partnership with the government’s investment arm crystallises significant value and gives transformational credibility to CAO’s strategy of building a broader long-term business.”
“This transaction has an immediate impact on fair value.”
The analyst believes the JV could add between US$8m and US$17m, or 3p-6p per share, to fair value.
“An alternative view is that Khazanah has implicitly accepted a valuation of US$17m (6p/share) for a business to which we had previously given nil value.”
Shepherd-Barron reckons the fair value of the company is £50 million.
Accordingly the analyst upped his target from 22p to 28p on September 27.
The following day, in response to the first half results, Shepherd-Barron said there was nothing in the interims to overshadow the major JV news.
“CAO is now demonstrating that it has made good progress in its long term strategy, while value is supported by a recent increase in the carbon price,” Shepherd-Barron said.
In reference to the carbon price the analyst said: “The price is volatile but CAO has shown in the past that it can extract better than quoted prices from its quality projects."
“Many industry observers continue to expect that prices will increase towards the end of this phase of the market in 2012/13”.