Downside for United Utilities now limited even if nationalised, Citi says

Analysts at Citi sounded a 'bullish' note on three of the UK's listed utilities, telling clients the trio's improved fundamentals were starting to show through, despite the heightened political uncertainty in the UK.

Another key element of the improved backdrop was the re-rating in the value of their shares following what it termed as the "exhuberant pricing" over the last several years.

"Finally! We have value. After several years of exuberant pricing of UK utilities, the table has turned in the face of political, regulatory and macro risks," analyst Jenny Ping said in a research note sent to clients.

"While we expect a turbulent ride in the months ahead given the uncertainties of Brexit and questions over the stability of the current UK government, we cannot ignore the fact that we are starting to see fundamental value."

Indeed, in the case of United Utilities the broker said recent share price weakness had more than fully discounted "operational fears".

To such a degree that there was now limited downside risk even under a nationalisation scenario.

For Centrica meanwhile, Citi said imminent clarity on the price cap methodology should improve visibility, while the rally in commodity prices should underpin the 12.0p per share dividend payout.

Lastly, and on National Grid, Ping said an improving business in the US should act as a hedge should Britain experience further political turbulence.

The analyst stuck to a 'buy' recommendation on shares of United Utilities (target price: 811.0p), Centrica (target price: 160.0p) and National Grid (target price: 961.0p).