Tuesday tips round-up: AT&T, Ithaca Energy, Aggreko

18th Jun 2013 06:38

AT&T is interested in buying Spain's Telefónica, according to reports Monday. The Financial Times' Lex column believes Telefónica's heavy debts of 70bn dollars net could make a deal easier as more than half of Telefónica's value is in its debt. "So AT&T could pay a 40% premium for Telefónica's shares and, because the debt's value is fixed, pay a total premium of just 20%, or about $155bn," the column said. AT&T would need to raise a mere $43bn in new debt and would be left with a debt/EBITDA ratio shade lower than Telefonica's current standing if the deal was made half in shares. But getting Telefonica to agree to such a deal is a challenge as "big synergies would be promised but would be hard to realise". While AT&T is a vast company, its purchasing power does not necessarily equate to big savings and cross-border operational synergies are a "fantasy". Ithaca Energy's acquisition of Valiant Petroleum earlier in the year is expected to boost its oil assets. The Times' Tempus column says Ithaca has done "pretty well" with its purchase of the company and the Greater Stellar area is its biggest asset, about half the present probable reserves. The area does not start producing until next year but will bring Itacha's output up to 25,000 barrels of oil a day, putting it behind only Premier Oil and EnQuest as the North Sea's biggest independent producers. "Having reduced risk from those Valiant assets and brought in partners that will bear the brunt of the production costs, Ithaca is now in a position to capitalise on those Greater Stella assets," the column said. Aggreko is anticipated to update the market on a more positive trading statement following two separate profit warnings, according to Tempus. APR Energy, its smaller quoted rival, announced the biggest ever contract win in the temporary power industry to provide Libya with power. The deal saw APR's shares jump 70p to 910p which is still short of the £10 at which they were floated in September 2011, after various upsets, including a profit warning and a failure to deliver results on time. Tempus said the long-term drivers for growth at APR and Aggreko continue to come from demand for energy in the developing world. "The developing world is short of energy and will remain so for the foreseeable future; APR is not far short of filling its expected order book for 2014 already. The shares sell on about 19 times' this year's earnings, which suggests that most of the good news is in the price. Hold." RDPlease note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.