British Gas owner Centrica PLC (LON:CAN) offers ‘risk/reward’ for investors according to RBC which rates the gas and power utility at ‘overweight’.
The Canadian bank has a 55p price target for Centrica (current price: 44p) and has this week hosted a call with its management team.
“We found the discussions very candid and enlightening with the key focus on three areas of disposals/balance sheet, cost competitiveness in British Gas & industrial action, and strategic positioning and ESG,” said RBC analyst John Musk.
He added: “We see underlying market conditions in energy supply as improving and CNA seems to be making progress on cost competitiveness.
“We recognise disposal processes remain uncertain and that Spirit may not achieve our £1bn valuation, but we think management are taking the right steps to simplify the business and the balance sheet/pension deficit should be repaired post disposals, such that dividends could return to the agenda towards the end of 2021.”