On Wednesday, JPMorgan adjusted its stance on Aker Solutions ASA (AKSO:NO) (OTC: AKRTF), downgrading the stock from 'Overweight' to 'Neutral.' The investment firm also revised its price target for the company's shares, setting it at NOK 40.00, a decrease from the previous target of NOK 61.00. The change in rating comes amid concerns about the company's investment strategy and debt levels following a substantial special dividend payout.
The analyst at JPMorgan acknowledged Aker Solutions' robust backlog and the likelihood of sustained work volume in Norway, supported by a strong tender pipeline. Nonetheless, apprehensions were raised after the company issued a NOK 10 billion special dividend. The payout has led to projections that the net debt to EBITDA ratio could reach approximately 1.1 times, which is slightly above the company's target of less than 1 times.
While noting these financial concerns, the analyst also recognized the operational challenges of delivering on the increased backlog, a situation faced by all competitors on the Norwegian Continental Shelf (NCS). Despite these challenges, the analyst cited the management's proven execution capabilities, bolstered by the Aker BP (NYSE:BP) alliance model, as a positive factor.
The downgrade reflects a cautious stance towards Aker Solutions' future growth potential and investment needs. The JPMorgan analyst's comments suggest a watchful approach to the company's financial strategy and its ability to manage the competitive environment in the NCS region.
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