BG continues to be the recipient of City advice on restructuring its businesses.
The company has suffered a number of production downgrades and management changes and is looking for a new chief executive, while the City seems to tip it as a takeover target every time the share price weakens.
As we see it, BG's main appeal lies in the potential rebalancing of the portfolio in the next eighteen months, reducing capital employed and increasing free cash flow. Without portfolio restructuring the business still offers strong volume growth from 2015 onwards as
We doubt that BG is a viable takeover target for the other oil majors. The large cap oils have stated repeatedly that they are focused on their own organic opportunities while at the same time disposing of assets that no longer meet their returns criteria and fail to offer long term growth potential.
With BG's board intent on 'accelerating the creation and delivery of longer term value for shareholders' we have a proposal - demerge LNG. Effectively creating two smaller but focused businesses, BG E&P and BG LNG, we look at the merits of such. We find two businesses, each with exposure to growth and an enviable position in its core market but with very different drivers, financial attributes and likely valuation bases - yield for LNG, growth for E&P. Smaller in scale, but still holding critical mass, each should also be better placed to encapsulate in its valuation a premium for strategic position and management control. Taken together with forward potential we set a new 12 month price target of £14.
But Canaccord said it believed such a split was unlikely :
The current LNG market environment makes the economic appeal of a standalone business unlikely, given that the capacity to secure third party volumes for arbitrage opportunities has changed in the last decade and current evidence from the US is contrary to a breakup, with the notable shift towards greater integration.
BG ended 25.5p higher at 1272.5p.
Miners continued to move higher following renewed signs of demand from
A number of companies saw their shares go ex-dividend. These included
Management used the first half results to flag a cautious outlook on profit development in the second half, which we expect to lead to consensus full-year downgrades of around 5% on EBITDA and around 20%-30% on pretax profit. However, the share price is down 42% since its peak of 617p on 26 February. Given the limited downside to our reduced 330p price target, we upgrade
Shares in Vimto maker Nichols lost their fizz, falling 36p or nearly 45 to 919.5p after a court ruled it must pay £8m to settle a dispute with a Pakistani distributor Gul Bottlers over its right over the drink in that country.
N+1 Singer analysts said:
Nichols has updated the market on a previously flagged litigation issue. The outcome is worse than had been anticipated, with the cash cost to settle the dispute at around £8m (2% of market cap) versus the £2m expectation. Whilst the outcome is disappointing it is no more than a setback which Nichols can comfortably absorb and it draws a line under the issue. Importantly, it does not make a fundamental change to the investment case. Commentary on first half trading/full year expectations is positive and we would view any short-term weakness as a buying opportunity on growth considerations and fundamentals.
Most Popular Stories
- Fantasy Football Gambling Industry Facing Increased Legal Scrutiny
- As States Legalize Pot, Will Traffic Deaths Rise?
- NATO Plans High-Readiness Force to Counter Russia
- Obama Promoting Economic Gains As Elections Near
- 'Guardians of the Galaxy' Conquers the North American Box Office with $16.3M
- GE Capital and Petters-Related Fund in Legal Battle
- California Conservation Conundrum: Water Use Varies Greatly Across State
- Combating Online Abuse Not Easy for Gamers
- Even With Surly 2014 Electorate, It's 'Still an Incumbent's World'
- Feds Want Nuclear Waste Train, but Nowhere to Go