Analyst says main investor focus on Foresight Solar’s potential for M&A
Foresight Solar Fund Ltd (LSE:FSFL) is attracting investor attention due to its potential for mergers and acquisitions (M&A), according to analysts at RBC Capital. The company recently released its updated estimates following the 2024 results, with a forecasted net asset value (NAV) per share of 110.4p, remaining relatively stable compared to the previous year.
Despite this, FSFL aims to sustain a 10% dividend yield covered 1.3 times. However, the total NAV return might see a decline due to limited reinvestment opportunities. Additionally, the company plans to divest its Australian assets, constituting approximately 9% of the NAV, in the third quarter of this year.
Amidst the strategic update announcement by FSFL and the increasing trend of takeover activities among alternative funds, RBC Capital pointed out that investor focus is turning towards the potential for M&A within the company. The analysts believe that there are plenty of M&A targets in the renewable funds sector, and a complete disposal of the underperforming Australian assets could significantly enhance FSFL’s portfolio attractiveness to potential bidders.
Furthermore, RBC emphasized that FSFL’s strategic update primarily emphasizes consolidation with a peer initially, rather than being acquired outright. Although being acquired could potentially drive a more significant share price event, the company’s focus seems to be on forming partnerships within the industry.
RBC Capital maintained a ‘sector perform’ rating for FSFL and slightly reduced its price target from 100p to 95p per share. The analysts believe that the potential for M&A and the strategic initiatives undertaken by the company could bring about positive developments in the future.
Overall, FSFL’s strategic focus on M&A possibilities and divesting underperforming assets is attracting investor interest. The company’s future prospects look favorable with the potential for consolidation and partnership within the renewable funds sector. Investors are closely monitoring FSFL’s actions in anticipation of positive outcomes from its strategic initiatives.
