Broker snap: Buy Rockhopper on Cairn takeover rumours

16th Jan 2012 09:48

Merchant Securities remains a buyer of oil and gas firm Rockhopper Exploration following speculation that sector peer Cairn Energy could launch a takeover bid.The Sunday Times reported that Rockhopper is looking for a partner to share development costs for its Falkland Island assets, with reports circulating that this could lead to a takeover from Cairn Energy."We would expect Rockhopper's shares to trade higher on this rumour," said analyst Brendan Long. Shares did just that on Monday morning, trading up 9.09% at 300p by 09:35."We believe Cairn would be a reasonable partner for Rockhopper given the company's proven record of developing oil assets...We believe Rockhopper's fundamentals and in particular the disconnect between the company's stock price and its value creates a compelling case for such rumours," Long said.The broker maintained its buy rating and 428p target price.