Analysts at Canaccord Genuity raised their target price on software and services firm Ideagen from 350.0p to 365.0p on Wednesday after the group bulked up its balance sheet via an equity raise earlier in the month.
Canaccord Genuity said last week’s £103.5m gross equity raise at 270.0 per share created substantial merger and acquisition headroom as it turned Ideagen’s £84.0m pre-raise net debt into an expected roughly £21.0m net cash position by the end of the 2022 trading year.
The Canadian bank, which stood by its ‘buy’ rating on the stock, also noted that Ideagen’s management had reiterated that current trading was “in line”, leading it to leave operating forecasts unchanged.
“In our view, the shares remain a core holding in UK SMIDcap enterprise software as they offer the highly attractive combination of double-digit end-market growth, a very high share of recurring revenues and scope for future EPS upgrades from earnings-accretive M&A,” said the analysts.
“Reflecting the 15% higher share count (+37.0m shares) and lower interest costs leads us to reduce earnings per share by 8-9%, although our estimates do not factor in (we believe inevitable) future M&A.”
Analysts at Berenberg downgraded exploration and production outfit Harbour Energy from ‘buy’ to ‘hold’ on Wednesday, stating more clarity was needed on reserves.
Berenberg said Harbour Energy’s capital markets day last week saw the group outline its recent performance and medium-term guidance, with production and cost outlook being broadly in line with its previous numbers and a $200.0m dividend coming in well and truly ahead of its previous $60.0m modelling.
However, Berenberg stated Harbour’s Tolmount project continued to be “challenging”, with another project delay and a reduction in reserves, and said it now expects lower group level reserves based on the company’s year-end 2021 guidance.
“The company guided to a 25-50% reduction in 2P reserves at Tolmount, or a circa 10-20mmboe reduction. In addition, year-end 2021 group-level reserves were indicated as being roughly in line with Chrysaor’s year-end 2020 level – roughly 458mmboe based on the competent person’s report,” said the analysts.
The German bank, which also lowered its target price on the stock from 425.0p to 350.0p, highlighted that this was below the expected level of 519.0m barrels of oil equivalent when adjusting pro-forma year-end 2020 reserves for pro-forma production and the Tolmount write down.
“The company points to CPR assumptions that are typically more conservative than management and flags that the numbers have not been finalised; however, we find this level of uncertainty unhelpful,” said Berenberg.
