Broker snap: Investec rates Centrica as a buy

21st Nov 2011 12:01

Investec has reiterated its buy rating on British Gas owner Centrica after the energy giant's announcement of "major moves in the gas market".The company announced on Monday that it has agreed to buy producing and development gas and oil assets from Statoil Petroleum for $1,525m (£965m), which are expected to increase production by 34,000 barrels of oil equivalents per day, a 25% increase. Furthermore, Centrica also announced a 50bn cubic metre gas supply deal with Statoil."We believe that these are good moves that will underpin Centrica's position on both the Upstream and Downstream side," said Investec analyst Angelos Anastasiou."Confidence still needs to be regained in the UK supply market for full confidence in the shares to be achieved. However we believe that the share price is now factoring in unreasonably pessimistic scenarios on the supply side, and that Centrica is underpinned by strong cashflow, good EPS [earnings per share] and DPS [dividend per share] growth, and undemanding multiples."The broker's 425p target price is put under review.By midday, shares were down 0.14% at 288.5p, but given the mass sell-off seen across most equity markets on Monday, the stock was still one of the better performers of the day in London.BC