FTSE 250 pair generate excitement about dividends and growth

One of these mid-cap companies threatens to make a record high, while the other begins its recovery. Our City expert explains what’s driving both sharply higher right now.

Mid-cap investors flocked to Energean (LSE:ENOG) and Genus (LSE:GNS) today after the oil and gas firm turned on the dividend taps and the animal genetics company boosted recovery hopes.

Energean shares were near a record high at 1,391p, having jumped 146p in the FTSE 250 index, following the start of dividend payments three months earlier than expected in the City. It marks the start of the company’s longer-term goal of becoming a sector-leading payer.

In addition to the dividend boost, Energean said its flagship Karish project in Israel is on track to start production within weeks, a move that should boost energy security in the region.

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Analysts at Peel Hunt have a target price of 1,500p and said Energean is on the “cusp of transforming its business” as the first gas from Karish moves closer.

Strong operational performances by its existing assets in the Mediterranean ensured Energean capitalised on higher prices to lift revenues by 65% to $339 million (£293.3 million), as underlying earnings more than doubled to $198.2 million.

Its medium-term targets were also lifted to annual revenues of $2.5 billion and adjusted earnings of $1.75 billion, underpinned by production of more than 200 kboed (kilo barrel of oil equivalent a day) compared with a 2022 range of 49-62 kboed.

The strong financial performance in the first half prompted Energean to accelerate payment of its maiden quarterly dividend, with 30 US cents a share due in accounts on 30 September.

Energean, whose acquisition of Edison E&P was completed in 2020, has pledged to increase average quarterly dividends from $50 million to $100 million once it achieves its medium-term targets.

It added today: “Energean remains committed to sharing its success with shareholders and re-confirms its target of returning at least $1 billion to shareholders by end-2025.”

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At Genus, the bounce for shares came amid relief at an unchanged dividend and signs that this year’s challenging market conditions in China’s porcine market are starting to improve.

The FTSE 250-listed company supplies breeding animals, semen and embryos to 50,000 customers in over 80 countries, including the majority of the world’s top 100 pig and dairy farmers.

Its revenues rose 3% to £593.4 million in the year to 30 June but a 50% fall in the average China pig price caused by the impact of Covid restrictions on demand hit the performance.

Adjusted profits fell 18% to £71.5 million on a constant currency basis, but Genus pointed out the figure was 25% higher when excluding its PIC China business.

Over the summer, China's live pig prices have risen above 21 RMB/kg, improving confidence that the country's porcine industry is on the path to recovery and profitability.

Chief executive Stephen Wilson added: “Industry expectations are that prices will continue to exceed 20 RMB/kg for the remainder of 2022, although there could still be some further volatility.”

He said his company’s supply chain investments meant Genus was well-placed to support Chinese producers' needs and benefit from the market recovery.

Genus has also increased its investment in gene editing, which is primarily focused on creating pigs resistant to the PRRS virus, to £7.9 million in the financial year.

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Today’s results sent shares 310p higher at 2,708p, but that’s only where the shares stood in mid-August. They had been above 5,000p as recently as November.

Peel Hunt said: “The shares have materially de-rated and there is effectively nothing in the valuation for the significant potential in gene editing, which is on-track for commercialisation in the 2024 financial year.”

The broker today increased its profits forecast for the new financial year by 5% to £80 million and moved its recommendation from “hold” to “buy”, based on a price target of 4,500p. The final dividend of 21.7p, which leads to an unchanged total dividend of 32p a share, is due to be paid on 9 December.