News

May 12, 2008

Amadeus Energy And The Tyranny Of Biofuels

By Our Man in Oz

Most companies, like football teams, perform better when playing on their home turf. Not Amadeus Energy, one of the few small foreign oil and gas producers to have found a way of succeeding in the USA. But it’s a different story back on Amadeus’s home turf in Australia, where the company has struggled. Not because of problems with conventional petroleum investments, but more because it made the mistake of undertaking a diversion into yesterday’s hot energy sector, biofuels. Today, Amadeus continues to be tagged as a biofuel loser, which means most investors are missing the fact that sky-high oil prices are delivering bumper profits from assets in the home of US oil, the southern states of Texas, Oklahoma, Kansas and Louisiana.

Watching the profit flows in comparison to the share price of Amadeus is one of the more bizarre sights on the Australian Securities Exchange (ASX). As profits go up, the price goes down. The result is a business which analysts at investment bank ABN Amro Morgans reckon is trading on an extremely undemanding forward earnings multiple of less than four. That’s based on a recent share price of A50 cents and forecast normalised earnings of A$23.4 million, or A12.9 cents a share, for the year which...