Analysts at Canaccord Genuity raised their target price on investment management firm Charles Stanley from 352.0p to 406.0p on Thursday following the group’s full-year results.
Canaccord upped its adjusted pre-tax profit forecasts for Charles Stanley by 4% and 2% in 2022 and 2023, respectively, and added that marking-to-market also drove its average funds under management and administration and revenue forecasts higher, although it also noted this was partially offset by increased expectations for operating expenses, per company guidance.
Alongside its 2021 results, CS management also announced the creation of a new operating division, Central Financial Services, with which it aims to address the market for simplified advice and will include model portfolios, foundation financial planning and execution-only services.
“Importantly, the division will refocus efforts in existing, under-developed services already provided by the company and does not comprise start-up business lines. While the Discretionary managed business faces challenges common with peers in terms of generating net inflows, the new CFS division holds promise in our view,” said Canaccord.
Canaccord also stated that if CS can leverage its existing capabilities to establish a net inflow trend, this “may present upside risk” to its forecasts for the ‘buy’ rated stock.
RBC Capital Markets downgraded its rating on shares of credit-checking firm Experian to ‘underperform’ from ‘sector perform’ and slashed the price target to 2,400.0p from 2,900.0p.
The bank said that despite “excellent” ESG reporting and a commitment to ‘improving financial health for all’, Experian is at longer-term risk of significant financial disruption from interventions designed to tackle economic inequality in the US, via changes to credit scoring and data regulation.
“Our deep dive into the genesis of a think tank proposal for an alternative Public Credit Registry highlights detailed policy objectives which, we think, could ultimately better be addressed by utility-inspired regulation,” it said.
“We think this material risk is at odds with the highly positive consensus view on the stock and we lower our rating to underperform.”
Analysts at Berenberg slashed their target price on personal protection systems manufacturer Avon Rubber from 3,335.0p to 2,955.0p on Thursday, stating the group was now entering “a testing period”.
While Berenberg said it maintains its view that Avon Rubber is “a high-quality business with attractive medium-term opportunities”, it also added that the company’s interim results provided it with “few reasons” to change its “more cautious stance”, with Avon remaining one of its “least preferred names for 2021”.
The German bank pointed out that a 65% second-half underlying earnings weighting was required to deliver full-year guidance, meaning that any further issues with the group’s body armour contract could “meaningfully affect” 2022 estimates.
“The next major test for Avon will be in the coming months as it embarks on the next testing phase of its body armour contract. We are encouraged by the comments that a thorough review has been conducted following the testing failures announced last December with revised product designs to address the issue now finalised; however, we seek certainty that the upcoming tests are successful,” said Berenberg.
The analysts also cautioned that any further challenges could result in a 10-15% cut to its 2022 estimates, which would likely also culminate in a derating of the stock.
“Shares have fallen 33% from highs to better reflect the near-term risks, but we require greater confidence in earnings before we can turn more positive,” said the analysts, who reiterated their ‘hold’ rating on the stock.
