Shares in BG Group (BG.) have suffered in recent days, since the oil, gas and liquefied natural gas producer reported results that were overshadowed by rising costs. But the cost overruns haven't impacted on Morningstar analysts' positive view of the company's outlook.
BG reported net profit more than doubled to $1.22 billion in the first quarter, thanks to strong sales of LNG in Japan, and Morningstar's Allen Good believes it is the firm's early entry into LNG that made it a leading player in the arena, positioning it to capitalise on growing demand for the fuel.
"We think BG will continue to deliver attractive returns by executing its strategy of connecting its low-cost resource base toi high-value markets," Good writes in his recently-updated investment thesis for the company.
Indeed, the share price weakness means that BG stock now carries a 5-star rating, implying that the market is currently undervaluing the shares compared to Morningstar's fair value estimate.
As always, there are potential risks involved. While the bulls highlight BG's operations in Brazil, Australia and Russia as solid revenue-generators, the bears point to the chance of depressed LNG prices in the future and risks associated with operating in emerging market countries.
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