CNE LN – UPDATE +20.6% so far: Reiterate Buy – Special dividend inline

*Received government approval for Senegal sale – to pay a 32p special dividend – goes ex 8 January, EGM on 8th January to vote on the distribution

*Timing and amount inline with what the company has previously indicated, next up on our catalyst call is the India ruling which could effectively double the market cap of the company

CNE LN – UPDATE – Upside remains huge – Ruling expected shortly

Thursday • 26 November 2020 • 10:47

*Market cap could effectively double on a positive ruling

*Decision likely already taken – now just paperwork

*Decision cannot be challenged – only process

*Speculation in press in India is that India could challenge the process saying that tax is not part of the bilateral investment treaty

*CNE does not think discussion about process has any merit and points out this speculation been going around for a long time

*Political decision as well – some speculation that by challenging the process India could push the costs away from Covid times

*A lot of people drawing parallels between Vodafone case and Cairn – a big difference is that Vodafone ruling does not come at a cost for India while CNE ruling would imply a cost – along with the cases also being very different

*Regarding the special dividend CNE still waiting for the final approval for the Senegal sale – expected by year end – we expect the dividend to be around 32p but will be paid through a share consolidation rather than a dividend payout

CNE LN – The New Star of Bollywood – Share Price Could Double!

Thursday • 15 October 2020 • 09:15

*Guidance for outcome of the USD 1.4bn arbitration case is still end of summer 2020

*Covid should not have delayed much as independent arbitrators are used to working remotely and based in 3 different countries

*Both parties have looked at losses suffered and not far apart in estimates

*Outcome of arbitration cannot be appealed although process can be

*Very few countries in the world do not respect the outcome at bilateral international courts – India said will adhere

*Case boils down to a reorganization the group did as part of an IPO in India in 2006 – they had to transfer some assets but none of them changed group ownership – 8 years later the government froze the remaining stake CNE held in the IPO worth USD 1bn

*A positive ruling in the arbitration could more than double the company’s current USD 1.1bn market cap

*Vodafone tax case in India very different, involved an actual transaction, but Vodafone remains invested in India and did not face any financial penalty

*CNE remains confident about its position in the case

Future of company leaves upside as well

*Large financial flexibility of the group allows for large upside potential

*Want to broaden the production base and also focused on ESG commitments – Now in a position where they can acquire more licences or even look at acquiring other players

*Shareholder return of Senegal sale completion expected by year end pending regulatory approval – worth approx. 32p but will likely be done as a share consolidation

*Also has addition upside potential in Senegal sale – can get an additional 13p per share in contingent payments by 2023

*Current OPEX cost per barrel is around USD 18

Valuation

Our SOTP valuation shows CNE trading at a:

13% discount to NAV without including India (pt 165p)

60% discount to NAV with a full repayment of its claim against India (pt 350p)

45% discount to NAV with a half of its claim against India being repaid (pt 250p)