Cohen Research Report Bullish on Pacific Asia China Energy
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Cohen Research Report: Optimistic Outlook on Pacific Asia China Energy
Summary
Cohen Independent Research Group recently issued a bullish "Buy" recommendation for Pacific Asia China Energy (TSX: PCE), citing the company’s shares as significantly undervalued. This article explores why the company is poised for growth.Key Highlights
- Coalbed Methane Prospects: The report emphasizes Pacific Asia China Energy's (PACE) promising coalbed methane (CBM) projects in China, identifying substantial growth potential.- Valuation Levels: Cohen has set various price targets based on different scenarios for PCE shares, predicting notable gains even under conservative estimates.
- Strategic Concessions: PACE holds valuable concessions in China, particularly in resource-rich Guizhou, which hosts a large portion of the country's CBM reserves.
In-depth Analysis
A report by Cohen Independent Research, reputed as Wall Street’s leading independent research firm, has rated PACE a "Buy" due to its coalbed methane operations in China. The report outlines three valuation scenarios for PCE shares, considering factors like Guizhou’s gas reserves, forecasted natural gas prices, and share price volatility.
Valuation Insights
As of June 19th, PCE shares closed at C$1.16. Cohen Research suggests a long-term fair valuation of C$1.96 under a pessimistic scenario, which includes low natural gas prices and a significant discount rate. The report argues that the current market value severely undervalues PCE.In more optimistic scenarios, PACE's Net Asset Value (NAV) could range between C$5.31 and C$7.83 per share. Optimistic projections place shares as high as C$11.56, assuming higher natural gas prices.
Strategic Concessions in China
PACE benefits from its position in Guizhou, holding concessions for over 20% of China's CBM reserves, projected at over 31 trillion cubic feet. PACE was the first Canadian public company to gain such concessions, operating the Baotian-Qingshan project through its subsidiary, Asia Canada Energy (ACE).Additional Ventures
PACE's prospects are bolstered by its other CBM concession, the Huangshi project, and a joint venture with Mitchell Drilling Services. This partnership leverages Mitchell’s Dymaxion drilling technology, expected to lower extraction costs and enhance project viability.According to Nathan Mitchell, president of the drilling company, this technology significantly reduces gas extraction costs, improving the economic feasibility of even less promising reserves. Revenues from this innovation will benefit both PACE and Mitchell.
Potential Risks and Progress
Cohen Research acknowledges potential challenges, cautioning that commercial viability is yet to be proven and highlighting technical study limitations. However, ongoing drilling and promising early-stage data suggest strong potential. Recent progress includes appointing a country manager to oversee joint venture activities in China.Conclusion
PACE continues to deliver encouraging updates as drilling advances in Guizhou. With expected natural gas price recoveries, Cohen Research and PACE shareholders alike may find their optimism rewarded. Overall, the report suggests that Pacific Asia China Energy is on a promising path to growth.You can find the original non-AI version of this article here: Cohen Research Report Bullish on Pacific Asia China Energy.
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