Stepping away from a previously bullish view, Jefferies now sees Petrofac as a ‘hold’ with an unchanged price target of 640p.
Analyst Mark Wilson, in a note, highlighted that Petrofac’s new bank facility and the Mexico sell-down alleviates balance sheet fears, as a bond matures this October, however, new business is needed.
“What remains is to deliver the $3.5bn of new Lump-Sum E&C awards we see as a minimum during 2018,” the analyst said in a note.
Wilson reckons it is “more than possible” for Petrofac to achieve the contract wins, with US$1.8bn so far landed in the year-to-date, though he cautions that no “true anchor” project (US$1bn or more for any single project) has been secured – albeit, he notes company guidance that major contracts could come at in late Q3 or Q4.
Adding to the uncertainty, the analyst added: “The unknown headline risk that also means we choose to exercise price target discipline and move to hold is the ongoing SFO investigation.
“We include a $400m cash fine across 2019-2020 and continue to point to industry awards as PFC's fundamental business answer to that situation.”