.: Cohen Research Report Bullish on Pacific Asia China Energy
Category:Home / Finance / Investing
A recent report published by the Cohen Independent Research Group, called Wall Street’s #1 Independent Research Firm, rated Pacific Asia China Energy (TSX: PCE: Other OTC: PCEEF) a Buy. The 68-page research report set three wide-ranging valuation levels as price targets for PCE shares for the company’s coalbed methane concessions in China. Considerations such as the wide range of the Guizhou’s abundant gas reserves, expected prices of natural gas during the research firm’s forecast period, and discounting factors, such as the stock price’s high volatility, were included in their price targets.
PCE shares, which closed at C$1.16/share on nearly 131,000 shares trading hands on June 19th, were given long-term fair market pricing of C$1.96/share by Cohen Research. This pricing was under the most pessimistic scenario. The low-case scenario included a natural gas price as low as $275 per 1000 cubic meters, and included a discount rate of 25 percent on the stock price. Cohen also reported, in the report, that at the current market price, PCE is “grossly undervalued.”
Cohen Research wrote, “As per our Base Case scenario estimates, the NAV of PACE’s resources falls in the range of C$5.31 – 7.83 per share (with a discounting factor of 20 percent).” Under the most optimistic pricing, assuming natural gas at $375 per 1000 cubic meters, Cohen targeted PCE shares at C$11.56/share. Cohen Research used the Net Asset Value (NAV) based method, which is one of the most accepted methods to value mining companies.
PACE, the acronym for Pacific Asia China Energy and not the stock’s ticker symbol (which is PCE, trading on the Toronto Venture Exchange, or TSX), is fortunate that one of its concessions is in the Guizhou province of China. Estimates describe this Chinese province as hosting more than 20 percent of China’s coalbed methane (CBM) reserves. The country’s total CBM reserves have been independently estimated to exceed 31 trillion cubic feet.
PACE was the first Canadian publicly traded company to participate in China’s granting of CBM concessions. PACE is participating in the Baotian-Qingshan CBM project through its wholly owned subsidiary Asia Canada Energy (ACE). China’s state-owned CBM company, China United Coalbed Methane (CUCBM), granted the 970-square kilometer CBM concession in September 2005 to ACE. The Baotian-Qingshan concession is located in the CBM-rich Guizhou province.
The Cohen Research NAV levels confirm what we anticipated. Earlier this year, we had reported on the assessment by Sproule International on the Baotian-Qingshan property. On March 1st, PACE had released three scenarios presented in the technical report filed by Sproule. The worst-case scenario on the property showed 504 billion cubic feet for three coal seams. The high case volume scenario for seven coal seams reached as high as 11.2 trillion cubic feet. Sproule’s assessment, called the “Most Likely Case volume” estimated 5.2 trillion cubic feet. Some analysts have valued each trillion cubic feet of gas at C$1 billion market capitalization.
This valuation does not include PACE’s other CBM concession in China, the Huangshi project, where the company began drilling test wells in mid May. Nor does this include the company’s joint venture partnership with Mitchell Drilling Services of Australia for the exclusive use of the drilling company’s Dymaxion® system in China. We interviewed Nathan Mitchell, president of the drilling company, who was both optimistic and excited about his company’s joint venture with PACE, and looked forward to expanding his drilling operations into China.
Mitchell told us, during that interview, his drilling company’s technology made it possible to extract gas for around US$1.25 per mcf. This would help make potentially “uneconomic” gas more economic under a very pessimistic scenario. Revenues from others using the Dymaxion system in China would flow into the coffers of both PACE and Mitchell. Obviously this joint venture is moving forward. On June 8th, PACE announced it had appointed a country manager for the joint venture, writing, “Mr. Pacey will oversee all aspects of the joint venture activities in China as the Joint Venture Company prepares to deploy Mitchell Drilling Contractors Pty Ltd's proprietary Dymaxion Surface to In-seam Drilling System later this year.”
Cohen Research did warn of negatives in making a hypothetical Bear Case for PACE’s projects. The research team wrote, “Commercial viability has not yet been proven.” The report also pointed out that technical studies were insufficient to “accurately assess the quality of CBM” to be extracted. Current drilling is underway on both CBM concessions. On June 12th, PACE reported, “Early stage desorption data from 12 samples show a range of gas contents between 105 and 407 scf/t (3.3 to 12.7 m3/t) after 4 to 19 days of testing. These values will be exceeded as desorption will not be completed for several weeks.”
The company appears on the right track and has been issuing regular progress reports, which are encouraging. As PACE progresses to its final drilling in Guizhou province, and as the price of natural gas recovers, we suspect Cohen Research will be pleased with their price targets, as might shareholders in Pacific Asia China Energy.
Article keywords: Coal, gas, CBM, coalbed methane, China, stocks, stock research, Canada, energy
Article Source: http://www.articles32.com
James Finch contributes to StockInterview.com and other publication. Sign up for our free update service. Just visit www.stockinterview.com for details. For more information about the Cohen Independent Research Group’s report on Pacific Asia China Energy, visit: www.cohenresearch.com
.: New Investing Articles
1). Hidden Investment Risks!
Every investment has risks that are obvious and risks that are hidden.
2). Be A Responsible Investor!
No one else is responsible for the results of your investments other than yourself.
3). How To Select Mutual Funds
Mutual funds are not the same as stocks, find out how they are different and which ones to select
4). Power of Autobot Software
Autotrade bot software for forex
5). Things To Consider While Hiring A Management Company
Get the ins and outs, tips and secrets that reveal the safe way to hire.
6). Paper Trading Credit Spread and Iron Condor Option Trades
Paper trading using one of the many virtual trading systems provided by option brokers, and now CBOE, is so important if you have never traded options. This is especially important trading credit spreads, like Bull Puts and Bear Calls and ultimately Iron Condors.
7). Rental Income For Shares!
It is possible to earn rental income for shares.
.: Top Investing Articles
1). Day Trading With The Camarilla Equation
Origins of the Camarilla Equation
Discovered while day trading in 1989 by Nick Stott, a successful bond trader in the financial markets, the 'Camarilla' equation uses a truism of nature to define market action - namely that most time series have a tendency to revert to the mean.
The equation produces 8 levels that are meant to predict these reversal points allowing the trader to profit from them.
2). Different Kinds Of Investments
These days, you can’t retire without using the returns from investments. You can’t count on your social security checks to cover your expenses when you retire. It’s barely enough for people who are receiving it now to have food, shelter and utilities. That doesn’t account for any care you may need or in the even that you need to take advantage of such funds much earlier in life.
3). Portable Alpha - What It Is, Where to Get It, and How to Use It
So much is being written about the emergence of “Quantitative Funds” and why this type of investment is becoming popular among both individual and professional investors. Eleanor Laise, in her Wall Street Journal article titled “Stock-Picker Jobs Going to Computers” wrote that “investors are attracted to quant funds for their non-emotional, disciplined method of investing.
4). Taking Control of your Finances.
To find money to invest for your future, you need to make sure that your outgoing expenses are less than the income that you are receiving. You need to develop an excess that you can have free to invest.
Now before you start to think….”well I don’t have any excess left…if I was earning more money….then I would have some free”. Let me dispel this myth…and tell you that it is a known and excepted fact that the amount of money that people earn has little if any bearing on whether or not they have an excess left to invest.
5). Gold: A Solid Investment
Make no mistake, the currency crisis is coming.
Rather than sitting back and letting it happen, protect yourself and profit from an economic upset that could basically render your dollars about as worthless as the paper they're printed on.
We saw a preview of this kind of debacle quite recently. In early 2006 a currency plunge triggered an avalanche of sell orders in emerging markets from Brazil to Indonesia.
6). With Property Investment You can Retire Young And Live Off Your Profits.
In the fast-paced, exemplary world today, money matters more than most other things. This is the era of LPG (Liberalization, Privatization, and Globalization.) People are interested in exponential growth of money rather than slow growth. So, instead of saving all your income and using it for your post-retirement life, you can invest your income in a judicious manner to multiply it and earn much more from it.
7). Momentum Investing and Trend Following: The Secret to Significant Portfolio Returns
Two popular terms which often confuse investors are "trend following" and "momentum investing." Perhaps the most glaring commonality between these two is their blatant defiance of "buy and hold," the practice of selecting an investment and holding it indefinitely, believing that over time the market goes up, and therefore any investment will appreciate.