STO bounced +16% as oil recently traded back above $US80, illustrating the stock’s potential over the coming years. STO’s large growth projects are near completion, so the draw on capital will decline. That means income for STO will trend higher over time, and franking (at some point) will return to its dividends. From a corporate perspective, the timing could be interesting if we see further weakness in the oil price, with Saudi Arabia and the UAE touted as potential suitors of STO. Moving forward, we now prefer STO over WDS, with their dividend profile set to improve compared to WDS. Plus, the potential corporate action adds some spice to the mix.
- We now see value returning to STO below $7, but again, if Trump gets his way, it will be hard going.
MM is neutral STO above $7
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