Uniper SE (UNPRF) stock is a buy regardless of whether or not a bid is forthcoming for the German utility, which was this week reported to be a target of Finland's Fortum Oyj (FOJCF) , analysts have said.
Better visibility over earnings, a strengthening balance sheet and scope for the dividend to triple before 2020 make for a compelling investment case, according to analysts at Berenberg, and mean the shares could top €21.0 in the next 12 months.
Shares of the power plant owning energy trader rose by just more than 1.5% during early trading in Frankfurt, to change hands at an intraday high of €17.98, before pulling back to trade 0.71% higher.
"We estimate the business can support a dividend per share CAGR of 40% over 2017-20, paid out of cash flow and beating gearing targets," said Lawson Steele, an analyst at Berenberg, in a client note.
Spun out of E.ON SE (EONGY) in a September initial public offering last year, E.ON was reported earlier this week to be in talks with Finland's Fortum over a sale of its remaining 46.6% stake in the company.
E.ON has previously said it will not sell before 2018 due to tax reasons. It is unclear what kind of price the stake would attract or whether it would be likely to result in a complete buyout by Fortum.
However, Berenberg's price target implies upside of around 18% from current levels for the stock, and is based on conservative assumptions of performance on "gas optimization" as well as a Russian power plant that remains out of action until 2019.
"A takeover is a possibility, but the stock looks cheap without it. We upgrade our recommendation to Buy and increase our price target to €21.00," Steele said.
Uniper sold its interest in Russia's Yuzhno-Rosskoye gas field for €1.7 billion in March, which not only reduces leverage for the company, but will also reduce its exposure to oil prices and wild swings in the Russian rouble.