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Investing.com - BofA Securities upgraded Pennon Group Plc. (LON:PNN) (OTC:PEGRF) from Neutral to Buy and raised its price target to GBP5.60 from GBP4.60, citing an improved risk/reward profile.
The upgrade implies approximately 20% potential total shareholder return, according to BofA Securities. The firm noted that Pennon shares currently trade at a 4% premium to 2025/2026 estimated Regulatory Capital Value (RCV).
BofA Securities highlighted three key factors supporting the upgrade: a credible path to value creation over the AMP8 regulatory period, a favorable conclusion expected from Ofwat’s investigation, and potential growth acceleration through regulatory reopeners.
The investment bank increased its 2027 earnings per share (EPS) estimates for Pennon, citing higher non-appointee revenues. However, it reduced its 2028 EPS forecast due to higher anticipated financing costs.
Pennon Group, a UK-based water and wastewater services company, has seen its stock recommendation improved as BofA Securities views the current valuation as attractive given the company’s regulatory position and growth prospects.
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