Broker tips: Cairn, C&W Worldwide, Drax
UBS upgrades Cairn Energy from ‘neutral’ to ‘buy’, as it is encouraged by the potential from a number of prospects in Greenland.
The target price for the Edinburgh-based oil and gas group is raised from 440p to 510p, a 20% (85p) premium to net asset value (NAV) for what the broker thinks will be the likely risked value of four prospects Cairn plans to drill in the third quarter.
The broker confirms its positive stance, seeing upside potential between now and an announcement of resource estimates in May, before drilling in June.
RBS downgrades Cable & Wireless Worldwide (CWW) to a ‘hold’, from ‘buy’, after the telecoms titan issued a warning on 2012 earnings last week.
“We believe it will take a strong operational performance over a sustained period for market confidence in CWW to be fully restored, following two profit warnings and the loss of the finance director less than 12 months after demerger,” the broker said.
The target price is almost halved to 52p, from 100p previously.
Coal-fired power station operator Drax has had its target price cut by broker Matrix after the government announced a carbon price floor on electricity generation in its budget last week.
However, the broker thinks the recent sell-off was overdone and “investors should look to the potential for positive policy changes in the next six months,” said analyst Adam Forsyth.
The target price is reduced to 428p, from 463p, but a ‘buy’ is retained as Matrix thinks that “the impact will be mitigated by higher efficiency, plant closures and higher energy commodity prices.”