Nomura reiterates 'buy' rating for BG Group

Nomura reiterated its ‘buy’ rating and target price of 1150p on BG Group after the company reported a rise in full-year earnings.

Pre-tax profits came to $2.97bn (£2bn) in 2015, compared with a loss of $2.3bn the previous year, despite the impact of falling oil prices.

In the final quarter, BG's losses improved to $1.17bn compared to $8.3bn in the fourth quarter of 2014

“The liquefied natural gas business showed resilience meeting expectations for the full-year ($1,456m in earnings before interest, tax, depreciation and amortisation), despite tough macroeconomic conditions,” Nomura said.

“The breadth of BG’s customer base underpins what we think is a resilient model, with BG supplying two new countries in the fourth quarter (Jordan and Egypt).”

The release marked BG’s final results before the takeover by Royal Dutch Shell is complete. BG said shareholders would not receive a further dividend for 2015 but they will receive Shell's 2015 fourth-quarter dividend.

Shell on Thursday reported a 44% decrease in fourth quarter profit to $1.8bn, in line with estimates.

“Our numbers suggest Shell has paid a premium for BG as we estimate an net asset value of 630p per share and 800p per share for BG assuming flat $50 per barrel and $60 per barrel, respectively (Nomura estimates 10% weighted average cost of capital vs Shell at 7-8%), albeit the reality was that during the course of the past 10 years, analysts’ estimates (including our own) of BG’s valuation have been as high as £20 per share,” Nomura said.

“BG offers a unique combination of: a) a high-quality differentiated set of assets with a portfolio that has been largely restructured; and b) an attractive free cash flow profile on the cusp of a significant positive inflection point. For Shell, we think buying BG is the right strategy for the long term.”