Scatec (Sell, TP: NOK56.00) - Hit by higher interest rates
Rising interest rates have reduced Scatec’s cash flow available for growth, and we estimate that the company is no longer fully funded to build the projects in its backlog. We see a funding gap of NOK4.1bn for the 2027 growth target, corresponding to 36% of its current market cap. Although asset sales seem the most likely near-term funding source, we would not rule out the need for fresh equity given the size of the gap. Scatec is trading at a 29% premium to the value of existing business and visible growth, which we view as unwarranted given limited capacity on the balance sheet to fund growth and limited value creation from it. We reiterate our SELL and NOK56 target price.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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