One to Watch: Clipper Windpower

CLIPPER Windpower makes the 2.5MW Liberty turbine and owns development rights for 9GW of wind-farm sites in the US. United Technologies recently bought 49 per cent of the company, paying between 150 and 180p a share. However, the Liberty turbine has been beset by start-up issues and Clipper is exiting a costly remediation phase.

Clipper Windpower

93.5p unch

Scotsman says BUY

The new chief executive has lowered guidance for 2010 – which disappointed the market – so as to ensure no further downgrades in our view. We are interested in Clipper's development assets, which we believe are potentially very valuable.

Improving gross margins and a large provision for any further remediation should ensure a much-improved set of results in 2010. Our DCF on the turbine business values it at 115p and we value the development portfolio at 100p per diluted share. We derive our price target of 215p, believing the shares could more than double from here. With 57p a share of cash, we believe there is downside protection too.

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• Investment markets and conditions can change rapidly and as such the views expressed should not be taken as statements of fact nor should reliance be placed on these views when making investment decisions. Past performance is not a guide to the future.

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