We all know KAR is undervalued at the current SP. The question...

We all know KAR is undervalued at the current SP. The question is, when will it reveal its true value?

Why would any large investor rush to invest here? The Company has a long history of ignoring shareholders' income and capital returns. Because of that, the SP is now and ever bound to labour.


World major Oilers offer a Dividend yield of ~4%.

Given expected FCF, KAR could pay two 10c dividends each year (a total cash outflow of A$160mpa) ... and still have funding for organic growth. A total dividend of 20c at a yield of 4% would imply a SP of ~A$5.00.

A dividend announcement would reward shareholders double (income and capital). The BOD has signaled rewarding shareholders with capital returns for sometime now.

As it stands, KAR is reasonably valued IF, as a 40kbpd producer, it was looking to sell ('m NOT implying they're looking to sell).

The market also ignores the quality of KAR's assets. Both low cost producers that could survive if OPEC+ caused a price war, to battle the USA high cost tight oil production.


This cash cow must be looking to make capital returns to shareholder at some point. We should have Cash at Bank in July24 equivalent to the outstanding GOM acquisition debt AND the Petrobras Deferred Acquisition (4%) debt.

It doesn't appear to be the BOD's intention to paydown that debt ASAP. They signal it is to be used "to support operations AND GROWTH". They even mention anticipated drawdown of the extra US$66m "accessing the higher facility amount and boosting liquidity".

Its a 5 year debt facility for which they paid US$27m.




The debt facility has cash reserve and other requirements BUT the KAR FCF will be substantial in the next few years.


Some interesting data coming out of Brazil: