Broker tips: Genel Energy, Kenmare Resources

Analysts at Canaccord Genuity slightly lowered their target price on oil company Genel Energy from 180.0p to 170.0p on Wednesday following the group's trading update.

Canaccord Genuity said Genel's trading update was "never likely to be a barnstormer" but admitted that it made it clear that the group's operational focus continued to be on investment into its Tawke licence in order to maximise cashflow from both it and Peshkabir fields.

The Canadian bank noted that inorganic expansion remained "the only obvious route to growth" following disappointing appraisal wells on its Sarta asset, the expiry of the Qara Dagh licence after inconclusive drilling, and the effective loss of its Miran/Bina Bawi licences and potential developments.

"The challenge, in our view, is that in 2023 cash generation looks set to be significantly lower than in 2022 as a result of sliding Tawke licence production, anticipated notably lower oil prices than in 2022, and no further benefits related to the Tawke override royalty which ended in August 2022," said Canaccord, which reiterated its 'speculative buy' rating on the stock.

"Consequently, we expect the balance sheet will look little different at YE23 compared to YE22. With anticipated expensive credit financing that would then require innovative acquisition terms to acquire the scale of assets the company would prefer, at the same time as high quality producing assets that are still likely to attract premium pricing."

Analysts at Berenberg raised their target price on mining firm Kenmare Resources from 710.0p to 780.0p on Wednesday following a "stable" end to the year.

Kenmare reported its fourth-quarter production and shipment numbers on Wednesday, with results "in line with to slightly better" than Berenberg's expectation, and "in line with to marginally better" than revised guidance.

While mined ore, excavated grade, and HM concentrate production was ahead of Berenberg's estimates, the analysts said it was worth noting that yield challenges, driven by slimes, appeared to have continued.

The German bank added that guidance was "a touch more conservative", with capex guidance at roughly $65.0m versus its $45.0m estimate. Berenberg also said capex for the group's WCP A move remained at $225.0m and questioned if some of this capex, particularly for the de-sliming circuit, could drift into 2023.

"We adjust our model for the Q4 actuals and our revised price deck. We also adjust for 2023 guidance, which negatively impacts our 2023 estimates, and assume more conservative recoveries in 2024," said the analysts.

"As we roll forward our model to 2023, this takes into account the net cash position and, as a result, our price target increases to GBp780 per share. We remain buy-rated on Kenmare, which is trading on 0.65x NAV and 1.4x 2023 EBITDA with a 30% FVFE yield and a 6% dividend yield."