Broker recommends UU and ST as top picks given ‘major capex super cycle’

(by Verity Mitchell)

Broker Bernstein recommended two UK companies – United Utilities and Severn Trent – as 'top picks’ given the UK’s 'major capex super cycle’.

Bernstein gave both Severn Trent and United Utilities an ‘outperform’ rating - Severn Trent with a target of 3,370p (current 2,894p) and United Utilities at 1,420p (1,305p). It rated Pennon Group at 600p (463p), “market-perform”.

The AMP8 programme is worth £104bn, and Bernstein reminded investors that the National Audit Office has estimated that at least £290bn pounds of enhancement investment will be needed by 2050. "The step change is driven by the need to renew ageing infrastructure and comply with stricter environmental standards, particularly around storm overflows and wastewater management," the report said.