Proactive Investors -
- FTSE 100 down 18 points at 7,608
- Ithaca (LON:ITH) jumps after Rosebank gets green light
- Centrica (LON:CNA) falls on Morgan Stanley (NYSE:MS) downgrade
Time to take profits in British Gas owner Centrica
It’s time to take profits in British Gas owner Centrica PLC, according to Morgan Stanley (NYSE:MS).
Investors took the advice and shares are trading 4.1% lower at 159.40p.
The investment bank has downgraded its rating to equal weight from overweight and would switch into SSE (LON:SSE), Engie or Fortum.
It pointed out Centrica's shares have appreciated 116% over the past year and sees them now approaching “fair value.”
Morgan Stanley has a 190p price target, at which the shares would trade on 12.6x normalised 2026 estimated PE, or 9.5x once adjusting for the elevated free cash flow during 2023-2026 period.
“While we continue to see a strong, and in many divisions improving, operating environment for Centrica, we see few catalysts near term to drive further re-rating,” the bank said.
Morgan Stanley said the market has demonstrated a preference for shareholder distributions over growth investment in 2023, which in part propelled Centrica's share price.
“Although we have seen no change to this mindset so far, as we look into 2024 we think this debate could evolve if investors re-engage with the renewables sub-sector and/or yields start to decline.”
“In such a scenario, we would expect a rotation out of Centrica and into more obvious growth stories, preferring SSE in the UK,” it added.
The downgrade comes a day after analysts at Liberum put a sell rating on Centrica, arguing that all the good news and recent self-improvement are now in the price.
The broker put a 150p price target on the stock.
Flutter's push into Serbia reasonably priced
Flutter (LON:FLTRF)'s move into Serbia has been well received by the City with shares up 1.0%.
Broker Jefferies says the 51% stake acquisition in number 2 Serbian omni-channel, local operator MaxBet, follows a well-trodden and proven path of acquiring a majority stake in a 'podium' position player in a regulated market, with scope to leverage Flutter's tech / product / talent to drive incremental growth and value.
It reckons access to the Flutter platform should drive MaxBet revenue synergies from enhanced digital marketing, global risk / pricing, and a broader range of iGaming content.
It also thinks the price at 8.6x EV/EBITDA, looks reasonable compared to other sector deals.
Government welcomes Rosebank approval
The government has welcomed the regulator’s decision to to approve the Rosebank project, saying it will boost the UK’s energy security and economy with a direct investment of £8.1bn from Equinor.
In a statement it said: “New projects like Rosebank are expected to be significantly less emissions intensive than previous developments, as they are more efficient and are developed with measures to mitigate emissions.”
“Even when we’ve reached net zero in 2050, the climate change committee say that a quarter of our energy needs will come from oil and gas, but the choice is between it coming from hostile states rather than from the supplies we have here at home.”
“The oil and gas industry adds £17bn annually to the economy, supports around 200,000 jobs, and will provide around £50bn in tax revenue over the next five years, which can be used to support the shift to cleaner forms of energy.”
Not everyone is happy though.
This is no less than an act of war against life on earth . . . https://t.co/DQ59phldXb
— Chris Packham (@ChrisGPackham) September 27, 2023