National Grid PLC (LSE:NG.) has been punished too harshly for its £7 billion deep discount rights issue, according to analysts at Swiss bank UBS.
The share issue hasn’t permanently changed the business, says the bank, rather reset the balance sheet back to 2010, when it was “sufficient to fund the business for fourteen years”.
Pre-emption rights were also protected for all shareholders, "unlike some of the non-pre-emptive ABBs which have taken place at a just c2% premium to RAB (eg SVT)".
Even with the general election, UBS is keen on Grid, arguing energy networks are an essential facilitator for green growth.
Both parties appear supportive of OFGEM, the UK regulator, while Labour has an £8.3 billion plan for GB Energy, but it is lower than NG's level on investments.
“We see NG as offering high growth and low valuation – the best of both worlds – at the existing share price.
“Returns are rising under the current mechanism while underlying profits growth [EBITDA] of c8-9% year across 2024-30E is in line with renewable players.
'Buy' with a target price of 1,145p is UBS’s view.
Shares today were down 2% at 859p with the nil paid trading at 173p down 8%.