Pennon Group PLC has seen its share price target upgraded by Citi analysts after completing a £490 million rights issue.
Funding cleared a “material overhang,” Citi said in a note, including after Pennon backed proposals from regulator Ofwat allowing it to raise bills by 23% over the coming five years.
FTSE 250 water firm Pennon on Tuesday confirmed the rights issue for new ordinary shares of 460p each had been fully subscribed.
Citi in turn noted it had removed a ‘high risk’ rating after the issue as concerns around overspending during the coming AMP8 regulatory period moderated.
Benefits under the new regulatory regime would take time to materialise though, leaving Citi ‘neutral’ on the stock but with a higher price target of 497p.
“We maintain our preference for United Utilities Group PLC, which looks more attractive on a relative basis given its underlying growth profile and stronger balance sheet,” analysts said.
Pennon shares fell 2% to 461.40p on Tuesday.