Analysts at HSBC downgraded their recommendation for shares of M&G and St. James’s Place from ‘buy’ to ‘hold’.
To back up their case, they pointed to the possibility that the economy’s reopening could drag on retail investors’ savings levels, including on the funds allocated to long-term savings.
Then there was the simple fact that share prices of both firms had registered sharp gains quarter-to-date, of 14% and 17%, respectively.
In the case of M&G, the estimated 2021 dividend yield on offer had now been pared from more than 9% at the end of March to 7.6%.
More significantly, HSBC estimated that M&G’s payout ratio on free cash flow would peak at about 93% in 2023, leaving it little room to grow its dividend per share over the medium term.
The analysts also pointed out that M&G’s with-profits business was being constrained by the lack of face-to-face meetings with advisers, while speculation in the press regarding a bid from Schroders had disappeared.
So too with St.James’s Place, HSBC judged the share price was now up with events, including its own short-term estimates.
Its shares were now changing hands at a 10% premium relative to its average trailing 10-year consensus price-to-earnings multiple.
Moreover, the shares were offering an 11% compound annual growth rate in Assets under Management and Administration, against the 18% achieved in 2014-19.
HSBC did nevertheless bump up its target prices for shares of M&G from 220.0p to 250.0p and from 1,375.0p to 1,525.0p, respectively.
Analysts at Barclays stood by their ‘overweight’ recommendation for shares of Harbour Energy, highlighting to clients the outfit’s “significant leverage” to near-term commodity prices.
That, they said, should translate into an “attractive” dividend yield with a first payout likely after the full-year results for the 2021 financial year.
Other positives included the integration of the Chryasor and Premier Oil businesses, which they said was progressing to plan.
Furthermore, the near-term outlook for cash flows was benefitting from the stronger-than-expected forward curve for Brent and UK natural gas.
The analysts added that using the then-current forward curve for Brent and UK gas, rather than Barclays’ base-case assumptions, would translate into an approximately 40% boost to the firm’s free cash flow in the back half of FY2021 and roughly 25% for FY2022.
Barclays also set a new target price for the shares of 620.0p to account for the recent share consolidation.
