Petrofac shares rally on Nomura upgrade to 'buy'
Petrofac shares rose 3.2% on Thursday after Nomura upgraded the stock to ‘buy’ from ‘neutral’ and raised the price target to 1,130p from 765p.
FTSE 250
20,831.84
16:39 20/09/24
FTSE 350
4,543.89
16:49 20/09/24
FTSE All-Share
4,501.08
17:04 20/09/24
Oil Equipment, Services & Distribution
4,928.34
16:30 13/09/24
Petrofac Ltd.
17.26p
16:40 20/09/24
It said the valuation was undemanding in the context of an incrementally positive Middle East outlook and improved risk/reward of Integrated Energy Solutions.
“We believe the downside risk of more charges in Integrated Energy Solutions (IES) is less than $15m-20m. Moreover, we think the receivables that are outstanding are manageable and the risks to the balance sheet are limited,” said Nomura.
The Japanese broker also pointed to the potential for a cash return of $1.9bn to shareholders through a harvesting of IES over the next 6 to 12 months.
In addition, the Japanese bank said that its Middle East oil tour points to impressive capex growth in 2016/17 that Petrofac is best placed to benefit from.
“Middle East Engineering, Construction, Operations & Maintenance (ECOM) is poised to grow further on renewed contract momentum in 2H15 and 2016,” said the bank. “Although we forecast net margins to fall to 7-9% from 9-11% over the medium term, we model impressive revenue growth in ECOM, which helps drive our 2016/17 expected earnings per share higher by 13%/37%, leaving us 4%/7% above consensus,” it added.