Lamprell upgraded to ‘Buy’ by Numis on pipeline potential despite swing to loss in half year results

Lamprell PLC (LON:LAM) has been upgraded to ‘Buy’ from ‘Hold’ by City broker Numis despite a swing to loss in its first half results as the broker saw reasons for investors to be “incrementally positive”.

Analysts at the broker said two IMI subcontracted jack-up new-build awards in Saudi Arabia were expected by year end for the oil equipment and services group, which underpinned management’s confidence in around US$500mln of awards where Lamprell was the preferred bidder.

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Numis added that the company’s bid pipeline had risen to US$4.1bn from US$3.6bn at the end of 2017 and while “award timing is as ever uncertain” there appeared to be more high quality potential contracts than at any time in the last 2-3 years.

Renewables prospects for the firm had also provided most of the pipeline growth and now totalled US$1.7bn, the broker said.

A long-term engineering, procurement, construction and installation agreement with the Saudi state oil firm Aramco would also be “well worth the wait” if Lamprell won a place on its preferred bidder list, obtaining which remained a “major priority” for the company, Numis said.

Aside from the upgrade, the analysts also tweaked their target price, cutting it by 1p to 86p, implying a 29% upside.

For the six months ended June, the oil rig maker recorded a pretax loss of US$20.9mln from a profit of US$1.2mln the year prior while revenue fell 2.6% to US$155.1mln from US$159.2mln the year before.

Profit performance was primarily hurt by a sharp rise in the cost of sales. Cost of sales jumped to US$147.9mln from US$138.5mln the year prior.

In mid-afternoon trading Friday, Lamprell shares were down 0.4% at 65.8p.

Story by ProactiveInvestors