Vallourec:UBS downgrades buy rating and slashes target price

(CercleFinance.com) - This morning UBS downgraded its buy rating on the share of the French oil services group Vallourec to neutral, fearing a potential capital increase.


The broker has slashed its 12-month target price for the share by almost 70% from 7 euros to 2.20 euros.

UBS' previous positive rating was based on an improvement in the trend of oil and gas investments and the results of the group's cost savings program. " but we have reassessed our investment case in light of the significant negative free cashflow" (9m-to date 571 million euros), analysts point out.

After the stock's collapse (-66% in one month), "we estimate the market is already pricing ~E300m of capital needed for Vallourec to stay within its (bank ed.) covenant," UBS says, which justifies its downgrade.

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