Analysts at Liberum lowered their target price on public transport operator National Express from 385.0p to 340.0p on Tuesday but said it remained confident of the sector’s recovery.
Liberum stated National Express faces some short-term headwinds from “a slower relaxation of pandemic restrictions” and “tougher competition” at its long-distance coach units.
However, the analysts said they “remain confident” in travel demand recovering fully in 2022, with non-volume risk contracts and school bus operations providing “a sound base to build a recovery” in more volume-sensitive and discretionary demand operations.
Liberum, which reiterated its ‘buy’ rating on the stock, noted that the dominant impact on its revised forecasts for the current year was the decelerated pace at which Covid-19 restrictions were being lifted in all of the primary countries in which National Express operates.
Peel Hunt initiated coverage of shipping services company Clarkson on Tuesday at ‘buy’ with a 4,000.0p price target.
The broker said demand for Clarkson’s services is rising as global trade recovers from the pandemic and newbuild order books climb in response to higher charter rates, from the lowest level in decades.
“The shift to alternative technologies and mandatory emissions reporting should increase demand for the group’s services further, and we believe there is potential to upgrade our forecasts if this recovery develops more robustly,” it said.
“We believe digital platform Sea/ gives the group competitive advantages, reducing the risk of disintermediation, and we estimate a profit stream worth £200.0m.”
IG Group’s derating is “harsh”, Barclays said as the bank reinstated coverage of the spread betting and derivatives platform.
Shares of IG have fallen 7% since it agreed to buy tastyTrade of the US for $1.0bn in January while the FTSE 100 index has gained 8%, Barclays said.
Barclays said the decline reflected worries about trading conditions normalising after business soared during the pandemic and a high price paid for tastyTrade.
Barclays, which hit the stock with a 1,035.0p target price, said revenue per client was likely to go back to pre-crisis levels in the 2022 financial year but that customers gained would help cushion the effect. Core markets will decline by 20% year on year but this is a 1% increase compared with the 2020 financial year, Barclays said.
The price paid for tastyTrade looks high at 19.5 times enterprise value to earnings but this drops to 11 times using guidance for low single-digit accretion, Barclays said. In the 2023 financial year the US market will slow down but with market share gains tastyTrade’s earnings should be £84.0m or 2.2 times 2020, Barclays said.
“We recognise cyclical concerns, but if IG can hit our forecasts, we believe the shares are very attractively valued. IG has only traded below current multiples … during periods of material regulatory uncertainty,” said Barclays.
Analysts at Berenberg nudged up their target price on gold producer Hummingbird Resources from 23.0p to 24.0p on Tuesday after the group released the results of a preliminary economic assessment on its Dugbe project in Liberia.
Berenberg stated that based on a gold price $1,400 per ounce and a 10% discount rate, the study generated a net asset value of $198.0m for the project as a whole, leading the analysts to value Hummmingbird’s interest at $39.0m, assuming production commences in 2025.
However, the analysts also applied a 50% risk weighting as Dugbe was still “at an early stage”.
The German bank, which reiterated its ‘hold’ rating on the stock, said with both Dugbe and the Kouroussa project in Guinea, Hummingbird has a pipeline that could ultimately raise attributable group production to almost 300,000 ounces per year or more if the life of the Yanfolila mine in Mali can be extended beyond 2024.
Berenberg did also cation that the timeline for the Kouroussa project, scheduled to enter production in 2023 with a build decision and financing due in the second half, appeared to be “very tight”, especially given Covid-19 restrictions, and believes that it could potentially be delayed beyond this.
