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On Tuesday, Berenberg analysts upgraded OMV AG (ETR:OMVV) (OMV:AV) (OTC: OMVKY) stock from Hold to Buy, setting a new price target of €56.00, up from the previous target of €43.00. The stock has shown remarkable momentum, delivering a 27.48% return year-to-date and trading near its 52-week high. According to InvestingPro analysis, OMV appears undervalued at its current market capitalization of $16.26 billion and P/E ratio of 10.7x. The upgrade follows OMV’s announcement of a significant business merger with the UAE’s Abu Dhabi National Oil Company (ADNOC). The two companies plan to combine OMV’s chemical unit Borealis with Borouge to form Borouge Group International. Additionally, the new entity will acquire Nova Chemicals from the Abu Dhabi sovereign wealth fund Mubadala.
This strategic move will elevate Borouge Group International to the status of the fourth-largest polyolefins company in the world. The transaction is anticipated to be finalized in the first quarter of 2026. OMV is set to hold a 47% ownership stake in the newly formed company. With an impressive overall financial health score of 2.86 ("GOOD") on InvestingPro, OMV appears well-positioned to execute this strategic transformation. Berenberg’s analysis suggests various valuation methods for OMV’s stake, indicating an initial worth between €15 billion and €20 billion. This compares to OMV’s current group enterprise value of approximately €28 billion, which does not account for provisions.
Berenberg highlighted that the minimum dividend from Borouge Group International is expected to cover over 90% of OMV’s regular dividend. They also noted the potential for OMV to distribute an attractive special dividend to its shareholders. The company already boasts a significant 7.63% dividend yield and has maintained dividend payments for 31 consecutive years. InvestingPro subscribers can access 10+ additional insights about OMV’s financial strength and growth potential. The analysts believe that if chemical margins improve, dividends from Borouge Group International could exceed expectations.
The merger is a pivotal development for OMV, promising a path of significant growth over time. Berenberg’s positive outlook is based on the company’s potential to achieve its growth and synergy targets following the successful completion of the deal.
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