Intrinsic Value Chariot Limited (CHAR.L)

• Previous Close: £1.46
• Intrinsic Value: £0.56
• Upside potential: -62%

Stock Valuation Context

Business Model And Market Position

Chariot Limited operates in the oil and gas exploration and production sector, with a strategic focus on Africa. The company is structured into two segments: Transactional Gas and Transactional Power, reflecting its dual emphasis on hydrocarbon exploration and renewable energy initiatives. Its key assets include the Rissana and Lixus offshore licenses in Morocco, covering significant areas with exploration potential. Chariot’s business model hinges on leveraging untapped energy resources in emerging markets, positioning it as a niche player in Africa’s evolving energy landscape. The company’s pivot to include mining power projects underscores its adaptive approach to regional energy demands, blending traditional and renewable energy solutions. Despite its relatively small scale, Chariot’s geographic focus and diversified energy strategy provide a distinct market position, though it faces competition from larger, more established players in the sector.

Revenue Profitability And Efficiency

Chariot reported minimal revenue of £80,000 for FY 2023, reflecting its early-stage exploration activities. The company posted a net loss of £15.58 million, with diluted EPS at -£0.0155, indicating significant upfront costs and limited monetization of assets. Operating cash flow was negative at £8.57 million, while capital expenditures were modest at £400,000, suggesting restrained investment amid financial constraints.

Earnings Power And Capital Efficiency

The company’s earnings power remains constrained due to its pre-revenue exploration phase, with negative profitability metrics. Capital efficiency is challenged by high operational costs relative to minimal revenue generation. The negative operating cash flow highlights the capital-intensive nature of its business model, requiring sustained funding to advance exploration and development projects.

Balance Sheet And Financial Health

Chariot’s balance sheet shows £4.97 million in cash and equivalents, providing limited liquidity against a total debt of £1.34 million. The modest debt level suggests manageable leverage, but the company’s ability to fund future operations hinges on securing additional capital or achieving successful exploration outcomes. The lack of dividend payments aligns with its growth-focused strategy.

Growth Trends And Dividend Policy

Growth prospects are tied to the successful exploration and commercialization of its Moroccan licenses and mining power projects. The company has not established a dividend policy, reinvesting all resources into exploration and development. Given its current stage, revenue growth is expected to remain volatile until projects reach production.

Valuation And Market Expectations

With a market cap of approximately £17.05 million, Chariot is valued as a high-risk, high-reward exploration play. The negative beta of -0.701 suggests low correlation with broader markets, reflecting its speculative nature. Investor expectations are likely centered on potential discoveries or partnerships that could unlock value.

Strategic Advantages And Outlook

Chariot’s strategic advantages lie in its focused African footprint and diversified energy approach. However, the outlook remains uncertain, dependent on exploration success and funding availability. The company’s ability to navigate operational and financial challenges will be critical in determining its long-term viability in a competitive energy sector.

Sources

Company filings, London Stock Exchange data