Canadian broker RBC has given its assessment of the three listed UK water companies and tweaked its targets lower, though it concedes there are lot of moving parts at present that could change.
All of the trio offer something a little different, it says, with Severn Trent (SVT) cleanest, United Utilities (UU) the sturdiest and Pennon (PNN) most discounted.
On RBC’s reckoning, Pennon (outperform, target 725p/sh down 50p) appears the most attractive on the balance of risk and reward given its outstanding business plan and lower valuation, but it sees a focus on the balance sheet.
Severn Trent (TP, 2500p/sh down 100p) remains well placed on ODIs [performance payments] although valuation looks more stretched, while United Utilities (TP, 1050p/sh down 50p) maintains the strongest balance sheet; though RBC is not convinced the positive improvement in outperformance can be maintained into AMP8.