Berenberg raises target price on 'extremely attractive' Petrofac

Analysts at Berenberg slightly raised their price target on Petrofac's shares from 420.0p to 440.0p on Wednesday, stating the oilfield services group's bid pipeline had it back on track for growth.

Berenberg said Petrofac, which reported full-year 2019 results in line with December's trading statement earlier in the week, had "strengthened its position", having transitioned to a "more focused, capital-light business" - with cash proceeds from asset sales boosting its balance sheet and "an attractive pipeline" of future project awards looking set to return the firm's engineering construction business to revenue growth.

While the German bank acknowledged that the overhang from an investigation by the Serious Fraud Office continued to cast uncertainty on Petrofac's investment proposition, the analysts felt the group's stronger standing elsewhere offset these concerns.

Berenberg was assuming Petrofac would receive a $300m financial penalty in relation to the SFO investigation.

"Valuation remains extremely attractive, with the stock trading at five-year lows, offering a fully covered 8.4% dividend yield, and trading at 7.3 times 2020E price-to-earnings ratio," said Berenberg.

"We retain our 'hold' rating, while increasing the price target to 440p and becoming increasingly positive on the outlook for the stock."