In this write-up, senior analysts Linus Öberg looks at Deutsche Rohstoff AG (DRO), a €154m
German-listed upstream operator in the U.S Oil & Gas exploration and production (E&P) sector.
Despite robust fundamentals, a track record of accretive capital allocation and an exceptional
management team, the stock remains largely under the radar, trading at a significant discount to both
its peers and the intrinsic value of its reserves. Through a DCF based on WTI oil futures a reserve
value of € 454m is derived, equivalent to an upside of 108% after deducting debt. Furthermore,
compared to U.S small caps in the E&P sector an upside of 103% is justified. Being a small cap listed
in Germany whilst holding all its assets in the U.S with a focus on fossil fuels has made them a severely
overlooked stock with an attractive upside. A target price of €74, equivalent to an upside of 137%, is
derived from its proven discounted reserves and a minority stake in Almonty Industries, a rising
tungsten mining star.
Investment Highlights
● Undervalued reserves which limits downside with good potential for more
● Proven capital allocators
● Operational excellence with lower-than-average break-even cost