Suncor Energy (SU) (TSE: SU) has reached an agreement with Elliott Investment Management that includes the potential sale of Suncor’s retail operations. Indeed, the activist firm believes that the potential sale of Petro-Canada gas stations may be a key to unlocking shareholder value.
Analyst Manav Gupta from Credit Suisse (CS) estimates that normalized EBITDA for Petro-Canada is C$800 million and expects the business to receive C$9.6 billion to C$11.2 billion in pre-tax cash proceeds. For reference, Suncor has a market cap of C$55 billion, meaning a sale at the mid-point would translate into approximately 19% of the market cap before tax.
In addition, three new independent directors will join Suncor’s board. This comes after the company’s CEO resigned earlier this month due to the death of a worker. It is likely that the next CEO will be an external candidate as the company tries to fix the safety issues that have plagued it in the past.
Suncor’s Investor Sentiment is Positive
The sentiment among TipRanks investors is currently positive for Suncor stock. Out of the 544,898 portfolios tracked by TipRanks, 0.5% hold SU. However, the average portfolio weighting allocated towards SU among those with a position is 5.82%. This suggests that investors of the company are quite confident about its future.
In addition, in the last 30 days, 1.3% of those holding the stock increased their positions. Therefore, the stock’s sentiment is above the sector average, as demonstrated in the following image:
Analysts See Significant Upside Potential
Suncor has a Moderate Buy consensus rating based on eight Buys, three Holds, and one Sell assigned in the past three months. The average SU price target of C$57.60 implies 44.5% upside potential.
Final Thoughts: Significant Value Can be Unlocked
Investors appear to like today’s announcement, as the stock is up 1.6% after initially popping more than 4%. If the estimate of Petro-Canada’s value is correct, then a significant amount of value can be unlocked for shareholders. As a result, both analysts and investors have a favorable view of the company.
