STO - BUY IMO, page-56

Interesting but what are the TPs and dates of recommendation of MSR and MS, i.e. are they current? Last accumulate rating from MSR seemed to be on 02/17/17 at $5.30 so it is about over 2 months latent: Morgan Stanley's work does not appear to be distributed anywhere and it seems either noone noted it or everyone did not care.

Santos Profit Hits Morningstar (MSR)'s 2016 Target, Shares Undervalued: MSR maintain their AUD 5.30 per share fair value estimate for no-moat Santos, following an expected modest improvement in underlying 2016 NPAT to AUD 84 million. This excludes an AUD 1.5 billion post-tax noncash Gladstone impairment charge. MSR are encouraged by improvement in the second half from a low base, in line with their view rising sales volumes from Gladstone LNG’s ramp-up, and improving Brent crude prices from the March 2016 quarter’s average USD 36.60 per barrel low toward our unchanged long-term USD 60 per barrel forecast, will lift EPS materially above recent historic lows. At AUD 4.00, Santos shares are 25% undervalued. Oil price appreciation towards MSR's USD 60 long-term forecast is the key potential catalyst for share price convergence to fair value. Full-year revenue increased 4.0% versus the pcp, to AUD 3.4 billion, just the beginning for MSR's projected near-60% increase to AUD 5.8 billion by 2019 with Gladstone then in full swing and oil prices at USD 60. Gladstone’s contribution in 2016 was just 5.2 million barrels of oil equivalent or 30% of expected full capacity and oil averaged USD 45 per barrel. MSR expect Gladstone to account for approximately 30% of Santos’ sales revenue by 2018, up from 9% in 2016. Santos’ 2016 profitability also matches our projections. After stripping out third-party sales, EBITDA margins of about 70% met our assumption, down slightly on 2015’s 73% figure. MSR expect an approximate 68% margin in future with earnings growth to match revenue gains for the next several years. MSR applaud Santos’ focus on supporting five core, low-cost/long-life natural gas assets, all with significant upside potential. This is the way to improve the company’s competitive position, though MSR still don’t expect a moat for the company soon given PNG and Gladstone's LNG trains were built at the peak of resources investment boom. Santos is not expected to generate midcycle returns above its cost of capital. Fair value uncertainty remains high.