FGE (Citi's broker report)Citi rates FGE as Downgrade to...

FGE (Citi's broker report)

Citi rates FGE as Downgrade to Neutral, High Risk from Buy (3) -

The company will take a $127m write-down on the Diamantina and West Angeles power projects after costs blew out. The company has obtained increased funding from ANZ ((ANZ)), but Citi notes this has been at a cost whereby the bank has an effective 13% interest in the company via a warrant. Citi is asking where has all the cash gone?

The broker is concerned that the project economics deteriorated to such an extent so quickly and, while management has undertaken a restructuring, it has has not instilled confidence. This is particularly worrisome to the broker because of the significant size of the contract won at Roy Hill amid a background of falling margins.

The rating is downgraded to Neutral, High Risk from Buy. The price target is reduced to 83c from $6.60.

Target price is $0.83 Current Price is $0.69 Difference: $0.145
If FGE meets the Citi target it will return approximately 21% (excluding dividends, fees and charges).

The company's fiscal year ends in June. Citi forecasts a full year FY14 dividend of 0.00 cents and EPS of 15.00 cents.

At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 4.57.

Market Sentiment: 0.0