Broker tips: Alpha FMC, Deliveroo, Just Eat, Hochschild Mining

by | Nov 24, 2021

Analysts at Berenberg raised their target price on asset and wealth management industry consultant Alpha Financial Markets Consulting from 420.0p to 470.0p on Wednesday, citing the group’s accelerated first-half performance.
Berenberg said Alpha FMC’s first-half results, published earlier in the day, showed the company’s “best trading period for a number of years”, with overall revenue growth accelerating to 44% year-on-year and organic growth increasing 22%.

Due to higher-than-target utilisation levels, Berenberg pointed out that this revenue growth had resulted in 53% underlying earnings growth and 41% earnings per share growth, given the dilution from its accretive placing at the start of the current financial year.

Most impressively, the German bank highlighted that the improved results appeared to reflect broad-based growth, with greater-than-20% growth recorded across each of Alpha’s geographies, “strong contributions” from new practices such as insurance and ESG, as well as “material progress” from recent acquisitions Axxsys and Lionpoint.

“Alpha remains an excellent growth story, with a clear competitive advantage in a structural growth market, thriving in new geographies and service lines while successfully integrating recent acquisitions. We expect this strong performance to be repeated for years to come,” said the analysts, who also reiterated their ‘buy’ rating on the stock.

Deliveroo’s sales could beat expectations and Just Eat Takeaway may be a takeover target, JP Morgan said as it upgraded both food delivery groups’ shares to ‘overweight’.

The bank said Deliveroo had overtaken Just Eat in London and tier two UK cities such as Birmingham, Leeds and Manchester. Just Eat still leads in more rural areas but Deliveroo is catching up, the bank added.

Just Eat is also achieving solid restaurant signups but faces more competition in rural areas. The share price values the UK business at zero and that could attract potential buyers for the group, JP Morgan said.

JP Morgan raised its recommendation on both shares from ‘neutral’ and upped its price target for Deliveroo to 392.0p from 332.0p. The bank trimmed its price target for Just Eat to £86.32 from £86.95.

“We see upside risk to [Deliveroo’s] 21E/22E GMV [gross market value] expectations and upgrade the shares,” JP Morgan analyst Marcus Diebel said in a note to clients. “For [Just Eat] … at current levels we believe the business is vulnerable to M&A given its strategic value.”

Barclays upgraded its stance on Hochschild Mining on Wednesday to ‘overweight’ from ‘equalweight’, arguing that this week’s selloff presents a value opportunity.

Shares in the gold miner tanked on Tuesday after Hochschild said it would fight plans by the Peruvian government to shut its mines there on environmental grounds.

Barclays said: “The selloff in the shares this week in response to the threat of mine closures presents a significant value opportunity, in our view.

“While we cannot completely rule out risks of mines being shut (downside scenario delivers -61% to 45p/share), we believe the subsequent softening of the Peruvian government’s tone suggests the around 60% valuation discount versus peers on P/NPV and 2022E EV/EBITDA presents a significant risk-reward opportunity.”

The bank, which cut its target price on the stock from 185.0p to 165.0p, also highlighted “significant” further upside potential from Inmaculada reserve upgrades, a value unlock from the Aclara demerger and upside risks to precious metals pricing.

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