NextEnergy Solar Fund Ltd's (LSE:NESF) shares are at an inflection point, according to analysts at RBC Capital Markets as they initiated coverage of the shares with a bullish note.
The investment bank started out with an ‘outperform’ rating and a share price target of 115p, compared to the recent closing price of 101.8p.
Noting that the shares have “languished in recent years, following a negative Covid impact, contentious issuance of preference shares, and sticking points on dividend cover”, analyst John Musk said he believes this represents an inflection point.
NESF growth and investment prospects in solar and battery storage are “robust”, with net asset value (NAV) momentum expected to some from near-term power prices and higher inflation.
“Solar and battery storage will play a pivotal role in the energy transition, and we believe NESF is aligned to net zero, with attractive return prospects,” RBC’s Musk wrote in a note to clients on Thursday.
With the portfolio having grown by around 895MW since its 2014 London flotation, the analyst said “we believe more is to come”.
He said the 7% dividend yield represents “an attractive entry point”, with the current 1% discount to NAV comparing to a renewable peer set averaging a 10% NAV premium, “unwarranted and counter to the growth prospects NESF offers investors in solar and battery storage markets”.