On Friday, Innergex Renewable Energy (INE:CN) (OTC: INGXF) saw its price target increased by BMO Capital from Cdn$9.00 to Cdn$11.00, while the firm maintained an Outperform rating on the stock. The revision reflects a recent transaction where Innergex sold a minority stake in its Texas renewable energy portfolio for US$188 million. This deal is perceived to bolster the company's financial position and unlock value, despite the sale valuation at 9x EV/EBITDA being considered modest.
The analyst from BMO Capital believes that even though the transaction's valuation did not meet expectations, it does not alter the forecast for Innergex's free cash flow per share. The new price target is influenced by the lowering of the 10-year Government of Canada bond yields and a more favorable outlook on the renewable energy sector recently. The target valuation has been adjusted to 10.5 times EBITDA from the previous 10 times.
Innergex's strategic move to divest part of its holdings comes at a time when renewable energy companies are under the microscope for their financial stability and growth prospects. The company's efforts to strengthen its balance sheet are likely aimed at improving its financial flexibility and supporting future growth initiatives.
The transaction is expected to have a neutral impact on Innergex's free cash flow per share. This indicates that while the immediate financial boost from the sale is acknowledged, it does not necessarily translate into a change in the company's operational cash flow performance.
The increase in Innergex's price target to Cdn$11.00 from Cdn$9.00 by BMO Capital underscores a positive outlook for the company amidst a changing landscape for bond yields and industry sentiment. The Outperform rating remains unchanged, suggesting confidence in the company's performance going forward.
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