Greencoat UK Wind discount can narrow, says Stifel
Published: 15:38 30 Jan 2024 GMT
Greencoat UK Wind PLC (LSE:UKW)’s fourth-quarter net asset value dropped due to power prices and lower inflation, partly offset by a maiden valuation of REGOs (Regional Energy Guarantees of Origin), notes broker Stifel.
Net asset value on 31 December 2023 was 164.1p (vs 165.8p on 30 September). REGOs were included for the first time owing to increased and sustained market prices over the last 12 months, which added 4.8p; power prices were minus 2.5p and inflation minus 2.4p.
Wind generation in 2023 was 13% below budget owing to low wind.
Greencoat continues to be relatively well positioned, adds Stifel, using a discount rate at the upper end of the peer group range at 11%, and it is also running with lower leverage than many.
“It has been able to grow its dividend over RPI in the past year, although its dividend cover is inflated relative to its peers as it is not amortising debt.
“The shares are on a 12% discount and we think there remains scope for this to narrow to mid-single digits, implying a price of 155p and at 145p.”
“We retain a positive rating,” said the broker.
Shares eased 0.5% to 144.7p.
