Broker tips: Tritax Big Box, CMC Markets, iGas Energy

by | Mar 30, 2023

Berenberg upgraded Tritax Big Box to ‘buy’ from ‘hold’ and reiterated its 170.0 target price on the stock on Thursday, citing valuation grounds.
The German bank said Tritax’s full-year results highlighted the group’s operational resilience, albeit with material valuation weakness and lower organic growth versus peers.

“As we roll forward our model, we expect market conditions and Tritax’s operations to remain more resilient than the market currently implies,” it said.

“We expect organic growth to lag peers, which is a function of Tritax’s larger exposure to (capped) index-linked leases and larger assets that generate lower organic rental growth levels. However, with a portfolio of mission-critical assets and higher covenant-quality tenant counterparties, income security is likely to remain robust.”

Berenberg said that despite Tritax’s significant development pipeline, long-dated income and a 26 basis points fall in the UK 10-year gilt rate over the last month, shares have fallen by 11% over the same time.

“Market pricing implies distress,” said Berenberg. “Which we do not expect to materialise.”

Jefferies has downgraded CMC Markets, after the online trading platform warned of a more challenging environment.

The broker cut its rating to ‘hold’ from ‘buy’ and reduced its price target to 190.0p from 275.0p.

Jefferies said: “Market volatility would normally be expected to favour CFD trading volumes, and CMC Markets’ closest peers have recently said that they expect to meet consensus forecasts for their next financial years.

“With CMC Invest UK still too young to make a meaningful contribution and stockbroking income coming down from pandemic highs, we cut our forecasts in line with the profit warning.”

CMC said on Monday that net operating income for the 2023 full year would likely be more or less flat, with lower equity volumes and a higher proportion of lower-margin institutional trading activity.

Analysts at Canaccord Genuity slightly raised their target price on exploration and production company iGas Energy from 75.0p to 80.0p on Thursday as the group’s focus on squeezing the most from conventional assets caught its eye.

“2023 has started well with production well ahead of target 2,000k barrels of oil per day, but even more appealing is the renewed focus on investment targeting overall increased and higher value hydrocarbons output,” said Canaccord. “That is to be achieved through a step-up in both new project investment and accelerated abandonment of higher cost fields.”

Canaccord Genuity, which reiterated its ‘buy’ rating on the stock, expects that combination to deliver “an appealing mix” of new lower-cost production, with the “significant benefit” of reduced unit operating costs.

“This is the first time in very many years that iGas’ conventional assets have had such a doubly positive trajectory, and that should provide the basis for extended and improved cash flow generation from the mature though increasingly rejuvenated asset base,” said the analysts.

“The renewable side of the business is also poised for progress. While there are no updates on the outcome of the GHNF grant application for the Stoke geothermal project, nor the CEF potential funding for NHS geothermal tenders, the company remains very optimistic and outcomes on both sets of funding proposals are anticipated very soon.”

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