Berenberg lowers target price on Kistos following FY results

Analysts at Berenberg slashed their target price on independent energy company Kistos from 455.0p to 305.0p on Monday following the group's full-year results and updated guidance.

Berenberg said it had updated its model to incorporate Kistos' "broadly in line" full-year financial performance but opted to reduce its FY24/25 production forecasts by 28%, which resulted in a reduction in its 2024 and 2025 revenue forecasts by 25% and 26%, respectively. Its underlying earnings forecasts were also down, by 41% and 36%, respectively.

However, Berenberg said Kistos retains "a strong near-term growth profile" thanks to its Balder X project in Norway, which also drives healthy FCF through 2025.

"Kistos has scope to add value through conversion of resources into reserves, primarily in Norway, and there is potential for upside in the recently acquired storage assets," said the analysts, who reiterated their 'buy' rating on the stock.

The German bank also highlighted that M&A activity was likely to remain "a key strategic priority" and that the company was continuing to "actively screen" for accretive opportunities.

"We adjust FY24 production in line with guidance and our longer-term asset profiles reflect updated proved-plus-probable (2P) reserves estimates," said Berenberg. On our updated numbers, the shares are trading on FY25 EV/EBITDA of 1.4x, EV/DACF of 1.7x and an FCF yield of 98%."

Reporting by Iain Gilbert at Sharecast.com