Terra Markets cuts view on Norwegian REC after poor Q3 figures

Oct 27, 2011 - Terra Markets lowered its rating on Renewable Energy Corporation ASA (OSL:REC), or REC, to "hold" from "buy" and the share price target to NOK 6.50 from NOK 7.50, after the Norwegian solar group issued disappointing third-quarter figures.

The broker has cut its estimates on REC and considers it is not likely that triggers for the share price will occur in the immediate future.

"We think that a possible takeover offer could be one of the triggers, which could drive up the share sometime, but this does not seem probable in the short term," Terra Markets analysts said.

Terra Markets was optimistic in relation to the consensus estimates and expected that REC would post earnings before interest, tax, depreciation and amortisation (EBITDA) and revenue of NOK 705 million (USD 127.6m/EUR 92.1m) and NOK 3.6 billion respectively. The average market expectations were for EBITDA of NOK 560 million and revenue of NOK 3.2 billion.

REC posted yesterday third-quarter EBITDA of NOK 370 million and revenue of NOK 3 billion.

"Operational figures were weighed down by relatively low production sales, weaker prices and many one-offs," the broker said.

However, Terra Markets was impressed with REC's cash flow from operations and the reduction in net debt with NOK 1.5 billion to NOK 5.3 billion.

Yesterday, the stock in REC lost 2.09% to NOK 5.16 on the Oslo Stock Exchange (OSE). By 1010 CET today, shares in REC had climbed up 3.29% to NOK 5.33.

(NOK 1.0 = USD 0.179/EUR 0.129)

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