Analysts at Westhouse Securities have lowered their price target on the shares
of mining and logistics group Hargreaves Services following its results for the year to May 2012. These were in line with expectations, but were overshadowed by the discovery of gas leaks at Malty and the consequent potential decision to close/mothball the site.
Even so, they write that: "this decision, which should be cash neutral at worst, will achieve two things in our view. First, it will materially de-risk the investment case by removing deep-mining risk altogether, and second, it will allow greater investor focus on the strong E&C business and the low-risk surface mine at Tower."
Nevertheless, the broker has lowered its target price to 660p (from 893p) to reflect the uncertainty until the mine is closed, but remains a buyer of the shares.
Analysts at Credit Suisse have today taken the decision to upwardly revise their price target and recommendation (to Neutral from Underperform) on shares of power station operator Drax. That as a result of updated estimates for biomass costs and biomass output trajectory, although they add that they still prefer SSE (Outperform, TP 1,450p) as a play on power prices in the UK.
Thus, they point out that on their estimates the £700m of capital expenditures which the company will undertake to convert half its units to biomass merely offsets the negative impact from the loss of free CO2 emissions permits and the CO2 floor price.
For that reason, they do not see a near-term EBITDA (earnings before interest, tax, depreciation and amortisation) 'step-up.'
Interestingly, they also call attention to how the company´s dynamics, going forward, will change, with biomass costs and net thermal efficiency becoming the important profit drivers (rather than fossil fuel prices).
WS Atkins, the design and engineering consultancy group, was a riser in a falling market on Wednesday after a pre-close trading update that was in line with recently downgraded guidance.
Northland Capital Partners said it was "reassuring that trading has not deteriorated since the company lowered FY [full year] guidance back in August."
The performance in the Middle East is disappointing, however, in the broker's view, but with levels of infrastructure investment picking up in the region Atkins is well placed to benefit, Northland's Andy Hanson said.
Broker Charles Stanley has reiterated its 'reduce' recommendation on WS Atkins, however. "Outlook for the full year remains unchanged implying flat PBT [profit before tax] growth following the downgrades in its US operations," Charles Stanley's Andy Smith said.
"We have recently downgraded our recommendation to Reduce as we believe the outlook for the US will get worse before it gets better as Atkins is heavily reliant upon public sector funding which is under pressure - hence our belief that the US has the potential to disappoint further,' he continued