City brokers are feeling upbeat about oil services group Petrofac Limited (LON:PFC) after Tuesday’s trading update, which aimed to convey ‘business as usual’ despite an ongoing corruption scandal which has engulfed the company.
The Jersey-based outfit has seen its share price collapse in recent weeks after it was forced to suspend its chief operating officer amid a Serious Fraud Office investigation.
It has seemingly eased some of those concerns with the statement though, after telling shareholders that its key engineering and construction (E&C) division – from which it derives the bulk of its earnings – has made “good progress” in the first half of the year.
Goldman Sachs, in a note, repeated a ‘buy’ recommendation and highlighted its view that the recent share sell off was overdone. The investment bank has a 584p valuation for the stock, suggested some 33% to the current price of 437.5p.
Elsewhere, Numis has moved to ‘buy’ on Petrofac having previously had the oil services group under review.
“We are now more comfortable with the risks surrounding the ensuing COO suspension, the potential fines and the impact of the investigation on ongoing business, and we resume an active rating,” Numis analyst James Hubbard said in a note.
“Yesterday's trading update confirmed our prior view than the project award outlook is robust, and that Petrofac has ample opportunities to win the $2.2bn of new work required to underpin our 2018 revenue forecasts; we see at least $3.8bn of awards that it is wellplaced to win due for award imminently.”
The ‘buy’ recommendation comes with a 600p target.