Analyst Actions: Raymond James Lowers Price Target on Spartan Oil
Spartan Oil Corp., (STO.TO) which said Wednesday it plans to merge with Pinecrest Energy, may well attract higher bids because of its strategic assets, Raymond James analyst Luc Mageau said, the Globe & Mail reported.
If the deal with Pinecrest goes ahead, the combined company plans to pay an 8.8% yield, based on Wednesday's closing price for Spartan, he wrote in a research note. The transaction will also be dilutive for Spartan shareholders.
"We continue to believe the Spartan assets lend themselves very well to a dividend plus growth model. However, we are less familiar with the Pinecrest assets and, given the higher capital efficiencies posted by the company, suspect that the Spartan assets will be doing the bulk of the heavy lifting under the revised corporate structure, at least over the near-term," he said.
Mageau lowered his price target to $6 from $7.50 and rates the stock "outperform."
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