QAV Stock Report: Horizon Oil Limited (ASX:HZN)

How does Horizon Oil stack up as a value investment?

Overview of the Company

Hori­zon Oil Lim­it­ed, incor­po­rat­ed in 1969 and head­quar­tered in Syd­ney, Aus­tralia, is engaged in the explo­ration, devel­op­ment, and pro­duc­tion of oil and gas prop­er­ties across Chi­na, New Zealand, and Aus­tralia. The com­pa­ny holds inter­ests in the Block 22/12 oil fields in Beibu Gulf, Chi­na; the PMP 38160 Maari/Manaia oil fields in New Zealand; and the Meree­nie OL4 and OL5 oil and gas fields in the Amadeus Basin, Aus­tralia. Addi­tion­al­ly, Hori­zon Oil is involved in the explo­ration and eval­u­a­tion of hydro­car­bons.

Current Share Price Analysis

At the date of our analy­sis, the price was at $0.20, which was above both our Intrin­sic Val­ue 1 (IV1) and our Intrin­sic Val­ue 2 (IV2), sug­gest­ing it might be over­val­ued rel­a­tive to these bench­marks.

Average Daily Turnover

With an aver­age dai­ly trade of $0.259 mil­lion, Hori­zon Oil Lim­it­ed is cat­e­gorised as a Small-Cap stock. This clas­si­fi­ca­tion can pose chal­lenges, par­tic­u­lar­ly regard­ing liq­uid­i­ty, poten­tial­ly affect­ing the abil­i­ty of investors to exit larg­er posi­tions with­out sig­nif­i­cant­ly impact­ing the mar­ket price.

Yield vs. Bank Debt

The com­pa­ny’s yield sur­pass­es the mort­gage rate, which is favourable for investors seek­ing div­i­dend income to coun­ter­bal­ance their mort­gage oblig­a­tions.

Financial Health Assessment

Hori­zon Oil Lim­it­ed demon­strates strong finan­cial health, with a sta­ble trend indi­cat­ing robust finan­cial sta­bil­i­ty and sound man­age­ment prac­tices.

Price-to-Earnings Ratio

The cur­rent Price-to-Earn­ings (PE) ratio stands at 7.79, which is not the low­est in the last six report­ing peri­ods, so we can’t score it on this met­ric. How­ev­er, it is less than the yield, which is a pos­i­tive.

Price to Operating Cash Flow Ratio

The Price to Oper­at­ing Cash Flow ratio is 3.35, below our thresh­old of 7. This indi­cates the stock may be under­val­ued, as it would take approx­i­mate­ly 3.35 years for the com­pa­ny’s oper­a­tions to gen­er­ate cash equiv­a­lent to the stock price.

Share Price in Relation to Book Value

The share price is cur­rent­ly above the book val­ue, fail­ing the “book plus 30%” test. This sug­gests that investors might be pay­ing a pre­mi­um for the com­pa­ny’s equi­ty, which could be seen as a neg­a­tive indi­ca­tor.

Ownership Structure

Direc­tors hold 20.91% of the shares, a sig­nif­i­cant per­cent­age sug­gest­ing strong align­ment with share­hold­er inter­ests and poten­tial­ly enhanc­ing investor con­fi­dence.

Recent Market Sentiment

The stock has­n’t had a recent 3‑point upturn, and is actu­al­ly cur­rent­ly slight­ly below its recent high mark, but has been its buy and sell lines since ear­ly 2024.

Consistency of Equity Growth

The com­pa­ny has not demon­strat­ed con­sis­tent­ly increas­ing equi­ty, a neg­a­tive indi­ca­tor of man­age­ment qual­i­ty and poten­tial­ly con­cern­ing regard­ing sus­tain­able growth.

Conclusion

Disclaimer

This pod­cast is an infor­ma­tion provider and in giv­ing you prod­uct infor­ma­tion we are not mak­ing any sug­ges­tion or rec­om­men­da­tion about a par­tic­u­lar prod­uct. The infor­ma­tion has been pre­pared with­out tak­ing into account your indi­vid­ual invest­ment objec­tives, finan­cial cir­cum­stances or needs. Before you decide whether or not to acquire a par­tic­u­lar finan­cial prod­uct you should assess whether it is appro­pri­ate for you in light of your own per­son­al cir­cum­stances, hav­ing regard to your own objec­tives, finan­cial sit­u­a­tion and needs. You may wish to obtain finan­cial advice from a suit­ably qual­i­fied advis­er before mak­ing any deci­sion to acquire a finan­cial prod­uct. Please note that all infor­ma­tion about per­for­mance returns is his­tor­i­cal. Past per­for­mance should not be relied upon as an indi­ca­tor of future per­for­mance; unit prices and the val­ue of your invest­ment may fall as well as rise.

Trans­paren­cy is impor­tant to us. We will always be very open and hon­est about the stocks we own. We will also always give our audi­ence advance notice when we intend to buy or sell a stock that we are going to talk about on the pod­cast. This is so we can nev­er be accused of pump­ing a stock to our own advan­tage. If we talk about a stock we cur­rent­ly own, we will make it known that we own it.

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