March quarter production was -3% below Citi’s expectations because of unplanned outages in Western Australia. The company has indicated that Scarborough marketing is being slowed as prevailing prices have been too low.
However, Citi believes contract prices are unlikely to move higher in the next 1-2 years, given the degree to which cheap new supply is competing for contracts. Hence, the broker suggests the company is unlikely to make a timely final investment decision on growth projects.
Either that, or it accepts weaker prices than currently factored into the shares. Citi maintains a Sell rating and raises the target to $31.18 from $31.12.
Target price is $31.18.Current Price is $35.65. Difference: ($4.47) – (brackets indicate current price is over target). If WPL meets the Citi target it will return approximately -14% (excluding dividends, fees and charges – negative figures indicate an expected loss).