Scotiabank analyst has modified the outlook for Meg Power (MEG: CN) (OTC: MEGEF), upgrading the inventory from Sector Carry out score to Sector Outperform.
The agency additionally set a brand new value goal of Cdn$35.00 for the vitality firm. The improve relies on the anticipation of above-average free money circulate per share (FCFPS) progress, regardless of the expectation that Meg Power will start paying money taxes by late 2027 or early 2028 with a West Texas Intermediate (WTI) oil value at $70.
The analyst highlighted Meg Power’s sturdy manufacturing progress profile and share buyback program as key drivers for the expected strong FCFPS progress within the coming years. The agency estimates a progress charge of 9% at $70 WTI. The valuation of Meg Power was additionally famous as cheap when in comparison with its friends, buying and selling at a 2025 estimated debt-adjusted money circulate (DAFCF) yield of 9%, versus its oil sands friends at 8% and small to mid-cap friends at 10%.
The report means that Meg Power’s singular high-quality producing asset makes it a gorgeous potential acquisition goal. The corporate’s tax swimming pools, higher-cost debt that could possibly be refinanced at decrease charges, and operational synergies have been cited as elements that supply added worth to potential acquirers. Moreover, the analyst identified that Meg Power has a number of manufacturing progress alternatives at its Christina Lake and Surmont initiatives.
Meg Power’s standing as a “clean” story was emphasised, suggesting that its easy and targeted enterprise mannequin could possibly be helpful within the occasion of a takeover. The analyst didn’t, nevertheless, point out {that a} transaction was imminent.
In different current information, Canadian oil producer MEG Power (OTC:) reported a powerful Q2 2024 efficiency, with a notable internet debt goal of $600 million set for Q3. The corporate reported an adjusted funds circulate of CAD354 million and a free money circulate of CAD231 million. MEG Power additionally introduced a quarterly money dividend of $0.10 per share, payable in October, marking its evolution as a mature entity within the sector.
As well as, the agency skilled a 17% enhance in bitumen manufacturing from the earlier 12 months, averaging 100,500 barrels per day. Notably, the graduation of the Trans Mountain Enlargement pipeline is anticipated to boost MEG’s netback and profitability.
MEG Power additionally repurchased CAD68 million in shares and repaid $53 million in senior notes, reflecting its dedication to shareholder returns. Current developments additionally embrace the appointment of Mike McAllister to MEG’s board of administrators. Lastly, the Oil Sands Pathways Alliance venture, geared toward optimizing manufacturing capability, is reported to be greater than 75% full in design.
InvestingPro Insights
In gentle of Scotiabank’s optimistic outlook for Meg Power, real-time knowledge and insights from InvestingPro additional reinforce the corporate’s monetary well being and potential for investor returns. Meg Power is at the moment buying and selling at a P/E ratio of 12.36, which is interesting when paired with its near-term earnings progress, as highlighted by one of many InvestingPro Suggestions. This means that the corporate is valued fairly out there, aligning with the analyst’s valuation evaluation.
One other InvestingPro Tip signifies that Meg Power has been actively shopping for again shares, a transfer that may sign confidence from administration within the firm’s worth and prospects. Share buybacks may also improve earnings per share over time, probably resulting in elevated investor returns.
From a monetary standpoint, Meg Power’s market capitalization stands at $706.3 million, with a sturdy gross revenue margin of 47.39% over the past twelve months as of Q2 2024. The corporate’s liquid belongings additionally exceed its short-term obligations, offering monetary stability and adaptability. These metrics, particularly the sturdy revenue margin, complement the analyst’s view of Meg Power’s strong free money circulate per share progress potential and its attractiveness as an acquisition goal.
For buyers searching for extra complete evaluation, extra InvestingPro Suggestions can be found, offering deeper insights into Meg Power’s monetary efficiency and market place.
This text was generated with the help of AI and reviewed by an editor. For extra data see our T&C.
