Update shared on03 Oct 2025
Fair value Decreased 3.12%Analysts have revised Santos' fair value estimate downward from A$8.37 to A$8.10. This change reflects updated expectations for stronger revenue growth and profit margins, along with sector valuation considerations after the XRG takeover proposal was withdrawn.
Analyst Commentary
Recent commentary from industry analysts highlights divergent views on the outlook and valuation of Santos, particularly in the wake of the withdrawn XRG takeover proposal. These perspectives shed light on both the potential opportunities and risks facing the company as it moves forward.
Bullish Takeaways
- Bullish analysts anticipate that the completion and ramp-up of major projects, such as Barossa and Pikka, will drive robust free cash flow over the next several years.
- Expectations of stronger revenue growth and margin expansion are leading to upward revisions in long-term forecasts and price targets.
- With the competitive pressure from the takeover proposal now removed, analysts believe the current valuation presents an attractive entry point for investors seeking exposure to the sector.
- Some see Santos as well positioned to outperform, given its project pipeline and ability to execute on strategic priorities.
Bearish Takeaways
- Bearish analysts remain cautious about potential execution risks related to project delivery, which could impact cash flow realization and overall performance.
- There are concerns that sector-wide downgrades in valuation multiples could limit upside for Santos despite project milestones.
- Uncertainty remains regarding future corporate activity and potential acquisition proposals. This could create volatility in the stock.
What's in the News
- The proposed AUD 28.8 billion acquisition of Santos by the XRG Consortium, including Abu Dhabi Developmental Holding Company PJSC and The Carlyle Group, was cancelled on September 17, 2025 (Key Developments).
- Santos had previously granted the XRG Consortium multiple extensions on exclusive due diligence and deal negotiations. However, no binding agreement was reached (Key Developments).
- Santos announced an ordinary fully franked dividend of USD 0.1340 per security for the six months ended June 30, 2025, with a payment date set for October 1, 2025 (Key Developments).
Valuation Changes
- Fair Value Estimate has decreased slightly, moving from A$8.37 to A$8.10.
- Discount Rate has fallen modestly from 7.06% to 6.96%.
- Revenue Growth has risen from 9.64% to 10.05%.
- Net Profit Margin has increased marginally from 23.24% to 23.32%.
- Future P/E Ratio has fallen significantly from 20.68x to 12.98x.
Disclaimer
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