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Linc Energy Limited
Signs MOU with SAPEX Limited
LNC A$0.76
BUY
24 July 2007 S&P/ASX 200 20 July 2007 XJO Jeremy Tobias
+612 9226 0086
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BBY maintains its BUY recommendation on Linc Energy Limited (LNC) after the company late last week signed an Memorandum of Understanding (MOU) with ASX-listed SAPEX Limited (ASX: SXP). This announcement comes after LNC last month signed international MOUs with Marubeni Corporation (one of Japan’s largest trading houses) and Shiv-Vani (one of India’s largest oil and gas drilling and exploration companies) for the establishment of potential JVs. The aim of the JVs would be to utilise Underground Coal Gasification (UCG) for power production, and in the medium term, coal-to-liquid diesel fuel production. LNC is fast becoming the partner of choice in the UCG and coal-to-liquids arena. We expect a continual re-rating in the share price leading into late September 2007 when the company’s demonstration plant will be in production. We have increased our price target to A$0.90/sh (prev A$0.80/sh) and have left our DCF valuation at A$1.52/sh (Chinchilla only). Key take-outs from the MOU with SAPEX Limited