Liberum initiated coverage of shares of John Laing on Friday with a ‘buy’ rating and 350p price target.
It noted that since the IPO in 2015, John Laing has delivered an average annual total shareholder return of 18% through a blend of capital growth and dividends.
“Its distinctive business model means it is an early-stage investor, which invests its own balance sheet capital. The company has had some challenges in the renewable energy market, which is not an area of expertise.
“However, it has a track record of achieving a 3x money multiple in Greenfield public-private partnership assets due to its strong heritage, skilled workforce and impressive performance in the market.”
Liberum said the weighted average discount rates used by the company are high, leaving potential for plenty of upside in the valuations of its assets as portfolios mature.
“After the sale of IEP and Australia wind, and the write-off of the biomass assets, it has over 30 projects invested globally, which lowers the risk profile of the portfolio through diversification,” it said.
Liberum said the company has a strong balance sheet and recent realisations in the portfolio mean it has plenty of liquidity to reinvest.
“As the company pays a special dividend of 5-10% of gross proceeds, the recent large realisations and anticipated sale of all the group’s renewable energy assets in the next two years provide a large degree of visibility for the dividend.”
