Broker tips: Howden Joinery, Entain, Johnson Service Group

Analysts at Canaccord Genuity raised their target price on building supplies retailer Howden Joinery from 710.0p to 735.0p on Friday, stating the strength of the group’s business model evident in its performance.
Canaccord said Howden had finished 2020 in “a strong position” and “much better than many had feared back in March”, with the company benefitting from a strong repair, maintenance and improvement recovery in the second half.

However, Canaccord highlighted that it was “important to recognise” that the strength of the group’s business model was what allowed it to take advantage of the bounce back in demand, with its in-stock model and good supply chain proving to be “very valuable” when demand came back strongly after the UK’s first lockdown.

The Canadian bank, which reiterated its ‘hold’ rating on the stock, also noted that the current trading year had seen “a solid start”, with the analysts suspecting Howden will enjoy a good first half, and added that assuming trading holds up at normal levels in the second half, it sees upside risk to its forecasts.

JPMorgan Cazenove downgraded Ladbrokes owner Entain on Friday to ‘neutral’ from ‘overweight’ following a strong share price performance, as it took a look at the online gaming sector.

The bank said online gaming benefitted from pandemic tailwinds in 2020 that will continue into the early part of this year.

“Growth will be harder to come by across the rest of 2021 given tough comps, US investment will continue to constrain profitability, while there is a regulatory headwind in Germany and regulatory uncertainty in the UK.

“Against this background and given substantial outperformance, we downgrade Entain to neutral,” said JPM, which also lifted its price target on Entain to 1,607.0p from 1,220.0p.

Analysts at Berenberg initiated coverage on workwear supplier Johnson Service Group at ‘buy’ on Friday, stating it was a “quality business” with a “clean investment case”.

Berenberg called Johnson Service Group one of the highest quality support services companies in the UK, providing a relatively commoditised product and service and consistently delivering organic growth ahead of both its market and its largest peers.

Although the German bank said current trading was “unsurprisingly affected” by the Covid-19 pandemic, it expects to see a full recovery in 2022.

Berenberg anticipates JSG then returning to its prior strategy of consolidating the wider UK textile rental market and in light of this, believes that shares, trading on 16.7

Its 2022 price-to-earnings ratio, were “mispriced” and expects them to “comfortably outperform” over the next 12 months as the UK economy reopens.

“We are significantly more bullish about JSG’s 2022 recovery potential than consensus and believe the business can grow earnings from 2019 to 2022,” said Berenberg, which issued the stock with a 190.0p target price.

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