WOR – Morgan Stanley rates the stock as Equal-weight

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WorleyParsons has acquired the energy, chemicals & resources division from Jacob’s Engineering for US$3.3bn. The company plans to fund the acquisition via a non-renounceable entitlement offer, stock, and additional debt.

Jacob’s Engineering will own around 11% of the enlarged group. The transaction will increase exposure to downstream engineering and chemicals and Morgan Stanley notes a strong geographical advantage in North America and parts of Europe. The broker estimates the transaction could double WorleyParsons net profit.

The broker believes WorleyParsons has been trading at a premium to international peers after Dar Group made a formal offer for the company 12 months ago, subsequently building a stake. Dar Group has confirmed it will take up its entitlement.

Morgan Stanley retains an Equal-weight rating and downgrades the target to $18.33 from $20.13. Industry view is Attractive.

Sector: Energy.

Target price is $18.33.Current Price is $17.84. Difference: $0.49 – (brackets indicate current price is over target). If WOR meets the Morgan Stanley target it will return approximately 3% (excluding dividends, fees and charges – negative figures indicate an expected loss).

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