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The Expert View: Northern Petroleum, ARM Holdings and Chariot Oil & Gas

A round-up of analyst notes, including their take on Centrica and Petrofac.

by Harry Brooks on Mar 21, 2012 at 05:01

We’ve rounded up some of the best comment from top analysts to give you their views on Northern Petroleum, ARM Holdings, Chariot Oil & Gas, Centrica and Petrofac.

Key stats
Market capitalisation£85m
No. of shares out93m
No. of shares floating75m
No. of common shareholdersnot stated
No. of employees37
Trading volume (10 day avg.)0m
Turnover12m EUR
Profit before tax-1m EUR
Earnings per share-0.01 EUR
Cashflow per share0.02 EUR
Cash per share0.19 EUR

*Correct as at 20 Mar 2012

FinnCap upgrades Northern Petroleum as Total eyes Zaedyus stake

Emily Ashford, analyst at FinnCap, has upgraded Northern Petroleum (NOP.L) to 'buy' following news that French major Total is interested in the group's Zaedyus discovery offshore French Guiana.

Total's announcement of an initial takeover approach for Wessex Exploration, which shares a 2.5% stake in the Zaedyus discovery with Northern Petroleum, saw Northern Petroleum's shares rocket up 20% on Monday. The value of both companies rose markedly back in September, when Tullow Oil (TLW.L), which operates Zaedyus, said that it had made a 'potentially transformative' find in the prospect.

'We see Total’s offer of £71.9 million placing a value of around £57.4 million on the Zaedyus project,' Ashford said. 'In light of the increased chance that Total will be interested in Northern’s stake we increase our target price to 120p and our recommendation to Buy.'

Shares in the group closed at 90.00p on Tuesday, down 2.00p or 2.17%.

More updates from FinnCap:

  • Advanced Computer Software (ASWA.L), no recommendation, target price: 60p (upgraded)
Key stats
Market capitalisation£7,990m
No. of shares out1,376m
No. of shares floating1,362m
No. of common shareholdersnot stated
No. of employees2116
Trading volume (10 day avg.)6m
Profit before tax£113m
Earnings per share8.19p
Cashflow per share9.14p
Cash per share25.60p

*Correct as at 20 Mar 2012

Investec upgrades 'standout' performer ARM Holdings

Julian Yates, analyst at Investec Securities, has upgraded Cambridge-headquartered chipmaker ARM Holdings (ARM.L) to 'buy' based on his view that royalty-driven returns, together with a year of stock price underperformance, make the group a solid choice.

Commenting on the wider backdrop for the sector, Yates said 'While the macro backdrop remains difficult, the extreme risks appear to have passed, at least for now, prompting us to re-visit our stock calls... the recent earnings season evidenced that corporates in the main have managed their business models well and are delivering respectable results against the current macro backdrop.

'ARM is the standout sector structural play and we see a multi-year royalty-driven upgrade cycle emerging driven by recent years' stellar licence results.'

Shares in the group closed at 584.50p on Tuesday, up 4.50p or 0.78%.

More updates from Investec Securities:

  • Unilever (ULVR.L), 'hold' (was 'buy'), target price: £21 (no change)
  • Debenhams (DEB.L), 'hold' (unchanged), target price: 55p (under review)
  • Synergy Health (SYR.L), 'buy' (unchanged), target price: 980p (was 941p)
  • Mears Group (MER.L), 'buy' (unchanged), target price: 283p (upgraded)
  • Bioquell (BQE.L), 'buy' (unchanged), target price: 134p (was 122p)
Key stats
Market capitalisation£340m
No. of shares out182m
No. of shares floating129m
No. of common shareholdersnot stated
No. of employees2
Trading volume (10 day avg.)3m
Turnover0m USD
Profit before tax-5m USD
Earnings per share-0.03 USD
Cashflow per share-0.03 USD
Cash per share0.04 USD

*Correct as at 20 Mar 2012

Seymour Pierce lifts target price for Chariot Oil & Gas

Sam Wahab, analyst at Seymour Pierce, has lifted his target price for oil and gas explorer Chariot Oil & Gas (CHARC.L) following the company's decision to issue new shares.

According to the company's latest statement, 18.1 million new shares have been sold at 170p per share (a 10% discount on Monday's close), raising £30.8 million. The group said that the cash will be used to boost working capital and drill a deeper target in the Tapir South prospect offshore Namibia.

Wahab adjusted his target price based on the financial effects of the share placing, increasing his target by 2p to 77p.

The analyst said that the market will be closely following Chariot's progress at Tapir South, which he said has only a 25% chance of success. Given the risky nature of the development, Wahab has a 'sell' recommendation on the stock.

Shares in the group closed at 184.00p on Tuesday, down 6.50p or 3.41%.

Key stats
Market capitalisation£16,081m
No. of shares out5,173m
No. of shares floating4,929m
No. of common shareholdersnot stated
No. of employees34969
Trading volume (10 day avg.)9m
Profit before tax£442m
Earnings per share8.50p
Cashflow per share31.46p
Cash per share10.55p

*Correct as at 20 Mar 2012

Liberum Capital says 'buy' Centrica as energy prices set to soar

Dominic Nash, analyst at Liberum Capital, has reiterated his 'buy' recommendation on Windsor-headquartered utility Centrica (CNA.L) in a report into the outlook for the UK power sector.

In his detailed report on the future of the sector, Nash projected reserve margins in power generation to fall as older power plants close, regulations to tighten as politicians lose faith in liberalised approaches, and the price customers pay for energy to rise at an above-inflation rate. He estimated energy bills to rise 30% in the next five years alone.

In terms of what these trends mean for Centrica, Nash said rising power prices would benefit the group because of its 20% stake in British Energy, which is part of EDF. He also predicted rising profits from the group's gas-storage arm, and said that vertical integration could further boost earnings per share.

Shares in the group, for which Nash has a target price of 370p, closed at 312.60p on Tuesday, down 0.20p or 0.06%.

Key stats
Market capitalisation£5,700m
No. of shares out340m
No. of shares floating237m
No. of common shareholdersnot stated
No. of employees15000
Trading volume (10 day avg.)1m
Turnover3,693m USD
Profit before tax343m USD
Earnings per share1.00 USD
Cashflow per share1.15 USD
Cash per share3.00 USD

*Correct as at 20 Mar 2012

Collins Stewart ups Petrofac's target price on orderbook strength

James Evans, analyst at Collins Stewart, has increased his target price for oil services firm Petrofac (PFC.L) based on a strengthening pipeline of engineering and construction work.

Evans placed a 'buy' recommendation on Petrofac back in May 2011 based on upside potential he saw in the group's integrated energy services (IES) division. 'We still think that this is a unique offering in the sector,' he said, 'and one that continues to be undervalued by the market (although not to the same extent as 12 months ago).'

The analyst went on to note that the oil services sector is in good shape, with spending on new projects benefiting from the current high oil price.

'We estimate that Petrofac will achieve at least 15% earnings per share compound annual growth from 2011 to 2015, driven by steady growth in its core businesses and IES net income increasing from $20 million to at least $200 million in 2015,' Evans said.

Shares in the group closed at £16.80 on Tuesday, down 25p or 1.47%.

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  • Chariot Oil and Gas Ltd (CHARC.L)
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  • Centrica PLC (CNA.L)
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  • Northern Petroleum PLC (NOP.L)
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  • ARM Holdings PLC (ARM.L)
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  • Petrofac Ltd (PFC.L)
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