Analysts at Credit Suisse took a fresh look at kitchens and joinery products supplier Howden Joinery on Monday and said it remained “comfortable” with its ahead of consensus full-year pre-tax profit estimates for the firm.
Credit Suisse stated it sees the recent de-rating in Howden as providing “a value opportunity” and that is of the belief that 2022 earnings expectations were “well underpinned by pent-up demand”, and some resilience in recent market share gains.
The Swiss bank also highlighted that its new analysis of market share by price bracket suggested “material scope” for Howden to continue compounding the market, driving sustained long-term growth in the process.
CS, which has an ‘outperform’ rating and 1,030.0p target price on the stock, did caution that risks included a material slowing in home improvement and a greater reversal of 2022’s share gains than it anticipates.
Analysts at Berenberg reiterated their ‘buy’ rating and 300.0p target price on major retail and commercial bank NatWest on Monday as it said the group’s earnings outlook was “bright”.
Berenberg stated that while the bank’s cost guidance was, in isolation, “somewhat disappointing”, it believes this will be “more than offset” by improvements in its revenue guidance.
The German bank also said updated guidance on the benefit to NatWest from rising interest rates also increased its conviction that consensus expectations of the bank’s revenue growth were too low.
“Changes to our estimates largely reflect the reclassification of Ulster Bank’s discontinued operations. Our underlying earnings are modestly weaker, reflecting higher costs (offset partially by higher revenues,” said the analysts.
“Trading on 0.9x TBV for an FY 2023E RoTE of 11%, and considering the bank’s circa 13% total effective yield, we believe that NatWest remains undervalued.”
Analysts at Shore Capital put their rating and target price on Morses Club under review on Monday following an unscheduled trading update from the lender, which included a profit warning and the sudden exit of its CEO.
Shore Capital stated that Morses’ update noted that its home collected credit division had been impacted in recent days by a rapid increase in claim volumes submitted by claims management companies and that chief executive Paul Smith had stood down from the role with immediate effect.
The analysts said that up until today, they were of the opinion that Morses had been doing “a relatively good job” of managing complaints when compared to its peers, making today’s news “a game changer” for the stock’s investment case, given that a number of other non-standard lenders had failed to survive after witnessing claims costs begin to spiral out of control.
Shore Capital also highlighted that outgoing chief executive Paul Smith had sold a number of shares only a few days prior to the announcement, something it thinks the FCA will be very interested in looking into further.
“Following this update, we are placing both our forecasts and recommendation under review. In all likelihood, the shares have now become un-investable, but without further detail and before knowing the extent of today’s likely share price gall (which is expected to be significant), it is not possible to take an informed view as to what an appropriate fair value is for the equity (although a zero valuation a distinct possibility) and hence recommendation there-on,” said Shore Cap.
