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On Wednesday, Deutsche Bank (ETR:DBKGn) analyst Giovanni Razzoli upgraded Banca Monte dei Paschi di Siena SpA (BMPS:IM) stock rating from Hold to Buy, with an increased price target of EUR8.60, up from the previous EUR7.50. This decision comes in the wake of a tender offer for Mediobanca (OTC:MDIBY) (MB), which has led to a reassessment of MPS’s market valuation.
Razzoli noted that MPS’s stock price has experienced a recovery, although it still trades at a 15% discount compared to its peers. Market apprehensions have centered on the potential earnings disruption for Mediobanca due to the tender offer. However, Razzoli’s analysis suggests that only a small fraction, between 3-6%, of MB’s earnings could be at risk. He emphasized that such a loss would not hinder potential upgrades to MPS’s earnings per share (EPS) or dividends per share (DPS).
The analyst highlighted that current market valuations do not fully account for certain opportunities that could arise from the tender offer, such as the potential to leverage Mediobanca’s balance sheet and to accelerate the distribution policy further. Razzoli believes that these factors contribute to an asymmetric risk-reward profile for MPS, prompting the upgrade of the stock and the adjustment of the price target to EUR8.60.
The upgrade reflects a positive outlook on MPS’s strategic shift from operating independently to pursuing consolidation. Razzoli’s analysis indicates that despite the risks associated with the tender offer for Mediobanca, the benefits for MPS could be substantial, leading to potential upward revisions in both EPS and DPS for the bank.
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