Stifel has downgraded Foresight Environmental Infrastructure (LSE:FGEN) to 'neutral', following a recovery in the share price from April’s lows.
At around 80p, the stock now trades on a 25% discount to NAV, but analysts believe the recent re-rating leaves little immediate upside.
That said, the dividend remains an attractive feature. A yield of 9.8%, backed by a healthy 1.32x dividend cover, continues to stand out in the listed renewables space.
Much of that strength comes from the portfolio’s relatively high-yielding biomass projects, which helped deliver a modest 0.6% total return for the year, despite a 6.3% fall in net asset value.
Operationally, performance was mixed. Anaerobic digestion met expectations, but wind and solar generation fell 18% and 8% short, respectively.
Meanwhile, the discount rate used to value assets ticked up to 9.4%, from 9.1%, reflecting sector-wide pressure from higher interest rates.
While £90 million of assets were sold over the past year, Stifel notes that further disposals are off the table for now, with management shifting focus to scaling up growth-stage assets.
A further £10 million has been allocated to share buybacks, but with £100m still drawn under its revolving credit facility, debt reduction is likely to be slow.
The shares were flat at 79.24p.