Edison Issues ADR Research Update on National Grid

Nov 18, 2015, 12:31 ET from Edison Investment Research

LONDON, November 18, 2015 /PRNewswire/ --

Aside from H1 results that demonstrated strong operational execution in the UK and reiteration of US rate filing prospects, National Grid has announced the intended sale of a majority stake in its UK gas business. The prospect of shareholder returns and long-term stronger growth outlook from the deal underpins the attraction of the company's combination of growth and yield. Our new valuation range is 874-1,067p per share ($66.5-81.2/ADR).

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Our previous valuation range was 796-1,067p per share ($60.6-81.2/ADR), with the low end based on a regulated asset value (RAV) based SOTP and the high end based on M&A multiples. Now that there is a defined transaction for one business on the horizon, we find it reasonable to include that at an M&A multiple. We believe the chances that National Grid can achieve a strong multiple for its UK gas distribution business are good, and therefore lift the low end of our range to 874p/share ($66.5/ADR).

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