Analysts at Berenberg downgraded exploration and production firm Cairn Energy from ‘buy’ to ‘hold’ on Wednesday, stating more clarity on the award payment related to its arbitration with the Indian tax authorities was needed.
In December 2020, Cairn was awarded $1.2bn in damages, plus interest and costs in relation to the arbitration and while discussions with India remains the “preferred route” for the company to recover the funds, Berenberg said recent reports indicated enforcement via the seizure of foreign assets of Air India, potentially alongside Indian multimedia firm Devas, was also progressing. Monetisation of the award through specialist funds was also allegedly being considered.
The German bank said full recovery would generate “significant upside” to the stock’s current price, but acknowledged that there was no clarity on when or, in the case of enforcement/monetisation, to what extent said upside might be realised.
“Full recovery of the India arbitration award could generate material upside for Cairn Energy. However, with continued uncertainty around the timing and scale of the ultimate cash receipt, we move our recommendation to ‘hold’,” said Berenberg, which also lowered its target price on the stock from 200.0p to 170.0p.
RBC Capital Markets upgraded Workspace to ‘outperform’ from ‘sector perform’ on Wednesday, hiking the price target to 1,050.0p from 750.0p as it said a recovery was not reflected in the shares.
“We believe Workspace’s share price performance since the pandemic broke reflects the negative impact on its business from its flexible leases, but none of the potential for a strong recovery,” RBC said.
“Its business is well-placed for such a recovery in our view, something that does not appear to be reflected in consensus forecasts.”
RBC said the target price increase results in 28% potential total return.
Analysts at Canaccord Genuity lowered their target price on oil rig construction business Lamprell from 90.0p to 75.0p on Wednesday after the firm announced a $120.0-150.0m capital raise requirement by the end of the third quarter.
Along with its delayed 2020 results, Lamprell’s capital raise announcement, of which the company anticipates up to $90.0m to come from new working capital facilities and the remaining $30.0-60.0m from shareholders, reflected the need to complete funding its share of the IMI yard in Saudi, to prepare Hamriyah and elsewhere for the coming boom in demand for offshore wind and to provide adequate bonding capacity for bidding on the large wind contracts the company expects to win.
The German bank said Lamprell quoted “one arresting statistic for this”, stating that management estimates a need for 16.0m tons of offshore wind jackets over the next nine years, in its target markets alone, which compares to its own capacity of 100,000 tons per year.
“We see this as a highly attractive opportunity, both in terms of volume of work and likely margin, and this underpins our continued ‘buy’ rating and new 75.0p (was 90.0p) target, with the cut reflecting the inclusion in our forecasts of an assumption of new shares issued,” concluded Berenberg.
