US Edition BG Group
£13.78 +51p
Questor says BUY
At the moment, BG Group's 2011 forward multiple stands at 17.6, falling to 14.9 next year, compared with Shell's forward multiple of 8.6, falling to 8.
However, BG has excellent assets – especially in Brazil – the true value of which is yet to be realised, as well as an expected significant growth in production over the next few years. A larger proportion of its output will also be oil over the next decade because of the group's offshore assets in the Latin American nation.
The group's liquefied natural gas (LNG) operations are also well exposed to Asia, a region defying the global woes.
Gas usage is also expected to rise as environmental legislation limits oil generation and as nuclear power has been deemed less attractive after the disaster at Fukushima in Japan.
BG's third-quarter results were about 5pc ahead of consensus, with replacement profit of $2.021bn. This was despite maintenance work in the North Sea and unrest in Africa. The group also upgraded its 2011 LNG operating profit guidance to $2.4bn from a range of $1.9bn to $2.2bn, after the unit was mostly responsible for the quarterly earnings beat.
The shares have lagged the sector to date, despite resurgent bid speculation.
BG shares were first tipped at £10 on January 5, 2009, and they are now up 38pc compared with a 20pc rise by the FTSE 100 over the same period. The shares remain
a buy.