Broker tips: Electrocomponents, Hurricane Energy

Jefferies raised its target price for Electrocomponents, telling clients it was buying into its chief executive officer's plans to exploit the opportunity for growth, instead of 'sweating' the assets and returning the surplus capital to shareholders as a European CEO might do.

On the back of the company's stated intent to step up its capital outlays and pursue so-called 'bolt-on' acquisitions, the broker revised its projections for the company's earnings per share, putting it 3.0-5.0% ahead of the consensus for the 2020 and 2021 financial years, and lifted its target price for the shares from 700.0p to 730.0p.

It also noted how the recent IESA acquistion had covered its cost of capital in its first year of ownership under Electrocomponents "which is important because Electrocomponents intends to make further acquisitions as it expands its range of value-added services."

The broker said its 'buy' recommendation for the shares was backed up by both macro and company-specific drivers, such as the addition of new value-added services and consensus forecasts for steadier industrial production from mid-2019, as well as potential upside in terms of the disributor of industrial and electronics products's valuation.

Analysts a Berenberg kicked-off their coverage of Hurricane Energy with a 'buy' recommendation and a 100.0p target price ahead of the expected announcement of first oil at Lancaster, which they predicted would come in the next few days.

"We think there is an attractive risk/reward at current levels and expect the stock to react positively to incremental newsflow on EPS developments at Lancaster, starting with an announcement of first oil, which we expect in the coming days," Berenberg explained.

A full de-risking of Lancaster would add 7.0p to their estimates for the company's NAV per share.

And according to the broker, many other potentially positive catalysts for the share price lay ahead over the back half of 2019.

The German broker said if successful in de-risking th development concept for so-called fractured basements on the UK continental shelf, that "could transform it into one of the biggest exploration and production (E&P) companies under our coverage".