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Credit Suisse ups target on Shell, but says further deleveraging needed
Analysts at Credit Suisse revised their target price for oil major Royal Dutch Shell higher, citing recent changes to their macro forecasts, at the same time that they highlighted the existence of several key positives for the shares.
However, they continued to see a need for further deleveraging, also pointing out that it was over-resourced in some areas.
Chief among the positive aspects highlighted by the Swiss broker was the oil major's shift towards a less capital-intensive version of its former self with more scale and "scope around key focus areas", which had allowed it to de-risk its dividend.
In a research note sent to clients, Thomas Adolff, Ilkin Karimli and Yaroslav Rumyantsev also pointed to the power of Shell's integrated value chain in Downstream, its good mix of opportunities across different themes and its technology innovation.
However, its cash conversion during the second quarter was labeled as "suboptimal" - for a second month in a row - although the Swiss broker conceded that was largely the result of non-recurring items.
To take note of as well, the investment bank also said that further deleveraging was required before the company's share buyback plans could go ahead.
Credit Suisse revised its target price for the shares from 2,750p to 2,850p, reiterating an 'outperform' recommendation.