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The Expert View: Lloyds, AstraZeneca and Sports Direct
Our daily roundup of the best analyst commentary on shares, also including Rathbone Brothers and Aberdeen Asset Management.
by Daniel Grote on Apr 02, 2014 at 05:01
Lloyds slump presents buying opportunity
The recent slump in Lloyds shares has prompted Numis to upgrade the bank from ‘add’ to ‘buy’.
Lloyds Banking Group shares dropped nearly 10% in March, as the government sold £4.2 billion of shares, bringing down its stake to less than a quarter of the bank. Yesterday Lloyds gained 1.3p to 76p.
Numis analyst Mike Trippitt said the falls had provided for a 30% upside to his 97p target price. He is forecasting 2.2% of capital generation in 2014 and 2015, roughly in line with guidance from management of around 2.5%.
Trippitt added that conduct fines remained the principle investment risk for Lloyds. Lloyds made a further £1.8 billion provision for payment protection insurance redress in the last quarter of last year, taking its 2013 provision to around £3 billion and its total provision to £9.8 billion.
Stamp of approval to boost AstraZeneca
Panmure Gordon has upgraded AstraZeneca from ‘sell’ to ‘hold’, after US rival Pfizer gained approval for its over-the-counter version of drug Nexium.
Pfizer paid $250 million in 2012 for the rights to market the non-prescription version of AstraZeneca’s Nexium drug. AstraZeneca will also receive milestone and royalty payments from sales.
Panmure analyst Savvas Neophytou said the approval and the upcoming medical conference season had prompted the upgrade for AstraZeneca.
‘The company has an economic benefit from the new product which we do not see as a direct competitor to prescription Nexium in the US,’ he said.
Neophytou added that non-prescription Nexium was likely to have a bigger impact for AstraZeneca when it is rolled out in European markets in the second half of the year.
Panmure has upped its target price for the stock from £35.00 to £39.00. Yesterday AstraZeneca gained 51p to reach £39.27.
Rathbones boost from double swoop
Rathbone Brothers’ announcement of a double acquisition has prompted Peel Hunt to up its target price for the wealth manager from £18.00 to £20.00.
Rathbones has bought Jupiter Asset Management’s private client and charity arms, as well as part of Tilney Investment Management’s London private client business.
Analyst Stuart Duncan reiterated his ‘buy’ rating and said the deals, which swell Rathbones’ assets by around £2.8 billion, would enhance the company’s earnings by 10% in 2015.
‘Overall, the deals look to have been completed at attractive prices, make good sense culturally and strategically, and enhance the investment case,' he said.
Shares in Rathbones yesterday rose 71p to reach £18.85.
Aberdeen still a ‘buy’ despite outflows
Espirito Santo has reiterated its ‘buy’ rating for Aberdeen Asset Management despite the fund group announcing net outflows of £3.6 billion from its equities business for January and February in a trading update yesterday.
Analyst Phil Dobbin pointed to the net outflows of just £200 million for the whole business over that period, and said he understood outflows from Aberdeen’s emerging market and global funds had not deteriorated in March. He has maintained a target price of 514p.
Aberdeen yesterday announced it had completed its deal to buy fund group Scottish Widows Investment Partnership from Lloyds Banking Group, and revealed wider cost-cutting measures than expected. It gained 34.7p to reach 425p.
Buying spree mapped out for Sports Direct
Liberum has raised its target price for Sports Direct from 850p to 950p and reiterated its ‘buy’ rating after identifying potential overseas acquisitions to boost its European presence.
Analyst Sanjay Vidyarthi said that while the company had a presence in 19 European markets, it had limited scale in many of them. ‘Organic growth alone is unlikely to be a viable option to scale, given the concentration of market share with the top three in many markets. Nonetheless, we see sufficient opportunities such that Sports Direct could have a pipeline of one or two meaningful acquisitions a year.’
Sports Direct, founded by Newcastle United owner Mike Ashley, was yesterday up 38.5p at 890.5p.
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Look up the shares
- Lloyds Banking Group PLC (LLOY.L)
- AstraZeneca PLC (AZN.L)
- Rathbone Brothers PLC (RAT.L)
- Aberdeen Asset Management PLC (ADN.L)
- Sports Direct International PLC (SPD.L)