Genel Energy PLC

Genel Energy PLC (LON: GENL) is a low-cost and low-carbon oil producer with licences in the Kurdistan Region of Iraq.

Investment Rationale – SELL at GBX 158.60

• Profit Booking Opportunity: The stock price witnessed a decent rally and managed to come close to the resistance 1 levels provided in the last coverage. Thus, it would be a decent opportunity to book profit for the investors.
• Decline in Oil Reserves: The Company had reported a significant decline in oil reserves at the end of 2021 when compared with 2020 levels.
• Production Guidance: GENL had expected FY22 production to be around the same level as FY21.
• Reduction in Net Production: In terms of production levels, GENL’s net production had marginally declined from 31,980 bopd (“barrels of oil per day”) in FY20 to 31,710 bopd during FY21.
• Technical Indicator: From a technical standpoint, the 14-days RSI of ~68.21 is approaching overbought territory.

Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22) (Illustrative)

Conclusion                                

Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Based on the weak production volumes, decent profit booking opportunity, unfavourable technical indicators, coupled with the unfavourable valuation conducted above, we have given a “SELL” recommendation on Genel Energy PLC at the current market price of GBX 158.60 (as of 07 March 2022 at 08:05 AM GMT). 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

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