UBS yesterday upgraded oilfield services group Petrofac from “neutral” to “buy”, with the target price increased from 1,575p to 1,875p. “We think Petrofac has a solid business model within the onshore engineering & construction end market,” the note said. UBS recommends “deploying cash organically” within other parts of the business in order to avoid the risks associated with M&A activity.
Shore Capital have reiterated their “hold” rating on outsourcing firm Capita, with a target price of 810p – below yesterday’s closing price. Although the brokers expects “contract news flow to remain positive” it insists “margin concerns persist” ahead of full-year results due on 28 February. “We see evidence of changing business models that weigh on capital requirements,” it adds.
Cantor Fitzgerald yesterday downgraded Yorkshire power station giant Drax from “reduce” to “sell”, with a target price of 524p. Drax is proceeding with plans to diversify into biomass power generation but the broker fears there are still concerns about the plan. “We believe that the plans are not risk free, and the group remains exposed to carbon costs even after the planned unit conversions,” the note said.