Investec has initiated its coverage with a ‘buy’ recommendation which comes with a 75p price target, compared to a prevailing market price of 26.25p.
Analyst Martin Young described SIMEC Atlantis as “a triple play on sustainability” monetising end-of-life waste, tidal stream power, and small-scale hydro.
Already a world leader in tidal stream power, thanks to the MeyGen Phase 1 project in Scotland, the Investec analyst pointed to the Uskmouth coal plant conversion project as another potential “game-changer”.
Securing planning permission and reaching financial close on the Uskmouth are seen as catalysts by Investec. The project can provide value accretion and would put SIMEC Atlantis on a road to profitability by 2023.
Young reckons the Uskmouth project could be granted planning permission in December, leading to financial close in the second quarter of 2021.
Significantly, Investec’s lofty 75p price target excludes MeyGen Phase 2 as it remains contingent upon important agreements – a CfD in the Allocation Round 4 and/or corporate ‘private wire’ power purchase agreement (PPA).
Investec does include incremental MeyGen value in its ‘upside’ valuation which is pitched at 112p per share.