Broker tips: Frontier Developments, AG Barr, Bellway

Analysts at Berenberg upped their target price on video games maker Frontier Developments from 1,800.0p to 2,000.0p on Monday, stating the group had really put the "(War)hammer down".

Berenberg said it could not be more confident in Frontier's growth outlook following the group's 2020 full-year trading update and increased its full-year underlying earnings estimates for the group by 4-10% over the next three years.

The German bank, which reiterated its 'buy' rating on the group, said the upgrade was made to account for stronger player engagement in Frontier's existing franchises, accelerating third-party publishing game pipeline and the expected release of a Warhammer real-time strategy game in 2023.

The analysts also highlighted Frontier's recent securing of the exclusive IP rights for Warhammer from Games Workshop as having "significant potential".

Berenberg added that Frontier itself expects revenues to be towards the top of its previously stated range of £65-72m, while underlying revenues were pegged to be around £11m-13m - roughly 8% higher than midpoint estimates.

Liberum upgraded its stance on Irn-Bru maker AG Barr to ‘buy’ from ‘hold’ on Monday, as it said the 30% drop in the share price was overdone and that it is a resilient, defensive, recovery play.

The broker, which upped its price target to 625p from 580p, said the combination of swift action by management and the transformation programme that started in September 2019 "provide resilience and flexibility for these unprecedented times".

"The positioning of its brands, price and value remain crucial as the group navigates some meaningful channel and product shifts," it said, adding that the resilience shown in previous downturns should provide confidence.

Liberum said the company’s balance sheet is strong and there is enough liquidity even if lockdown goes into CY2021.

"Modelling all the cash flow dynamics through we can see that debt peaks around £3m in June-20 with trough headroom of £57m of liquidity," Liberum said. "This provides a significant amount of liquidity considering the levers at the group’s disposal."

Over at Citi, analysts lifted their target price on shares of Bellway even after tweaking their profit estimates to factor in a slower ramp-up in construction activity.

The group, which was set to restart operations from 4 May, continued to have a "strong" order book of approximately £1.6bn and because of the gradual recovery was likely to remain so in 2021, they said.

Bellway was also deemed to have a "strong" balance sheet and management was expected to exercise "prudence".

"While there remains uncertainty around the strength of the underlying demand backdrop and clarity around this is only likely to come once sales offices recommence operations, we believe the group balance sheet remains in good shape to manage current challenges and management is likely to maintain a prudent stance flexing the pace of activity to current market conditions," Citi said.

Combined with a valuation of roughly one times its price-to-book multiple, the stock was said to be "relatively attractive".

Citi raised its target price for the shares to 2,958p and kept its recommendation at 'buy'.