Broker snap: National Grid is a top utility pick, says Nomura

24th Aug 2012 11:44

Nomura has reiterated its positive stance about utilities group National Grid, saying that the firm remains a 'compelling growth story [with] rising visibility'.National Grid's regulated UK businesses, which make up around 61% of total earnings before interest and tax (EBIT), are in the process of a review by Ofgem. Nomura said that last month's initial proposals were "reasonable" and have boosted visibility."National Grid is the stock with the most exposure to UK transmission - an investment opportunity with increasingly visible, inflation-indexed returns, and an attractive 8% CAGR [compound annual growth rate] to 2021 - a rare combination in an uncertain, low real return environment," the broker said on Friday morning.Meanwhile, Nomura reckons that the stock is cheap in the context of comparable investments, trading at 12.8 times next year's earnings compared with the sector-average multiple of 15.Nomura has maintained its 'buy' rating for National Grid and raises target price target slightly from 730p to 735p. At this target, the shares would trade at 13.5 times next year's earnings."It remains one of our top 'buy' picks in European utilities," the broker said.By 11:43, shares were trading 0.37% higher at 688.51p.BC