Les Billets de Monocle

Petrofac Update

19 January 2021

On Friday Petrofac fell by 30%. An impressive figure, but one that only brings the stock back to where it was two months ago.

The news behind the drop is the announcement by the Serious Fraud Office (SFO) that David Lufkin, former head of Petrofac sales, has pleaded guilty to 3 new charges of corruption.

Well, Lufkin had already pleaded guilty to 11 counts just a year ago so for us this does not change our scenario which is that:

  1. New CEO Samy Iskander will quickly reach an agreement with the SFO
  2. The fine that will be included in this agreement will be proportional to the value of the company (currently $320 million)
  3. Once this case is closed, the market will look at the value of Petrofac = 3 times the results. To give you an order of magnitude: LVMH has a valuation multiple of 35, Amazon over 100.

Finally, the season begins with the opening of Q4 2020 earnings and the release of Netflix's results tonight (interesting to see how this will play out with Disney+ competition).

Have a great week,

Charles

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