Broker tips: Sirius Minerals, National Express
Analysts at Berenberg downgraded agrochemicals outfit Sirius Minerals from 'buy' to 'hold' on Wednesday after the group's shares plunged a day earlier when it pulled its $500m bond sale.
Berenberg had argued that Sirius Minerals represented "an attractive risk/reward play" over the past year but following news on Tuesday that it has been forced to delay the offering of its bonds, the bank reckoned the risks relating to the project were now "greater than the reward".
"As such, we recommend that potential investors wait until certainty is achieved on the $500m bond offering," said Berenberg.
The company blamed the suspension of the planned bond offering on "current market conditions".
The German bank said Sirius' equity story was centred on the development of its Woodsmith mine in North Yorkshire, which will produce polyhalite, a mineral that could potentially compete within the potash and multi-nutrient fertiliser market.
"We remain positive about the credentials of polyhalite as a multi-nutrient fertiliser when it comes to market post-2020," said Berenberg.
However, Sirius' $500m bond was a key component of its financing package, given that completion is needed in order for the group to access a $2.5bn revolving credit facility that underpins the Woodsmith project.
Under the terms of the revolving credit facility, Sirius has to complete the high-yield bond offering before the end of September otherwise it cannot draw down on the funds.
"With the deadline for completion now drawing closer, the risk is now too high to argue that Sirius Minerals' shares currently represent an attractive investment."
Over at Canaccord Genuity, analysts took a fresh look at National Express on Wednesday, issuing the group with some new numbers following its "pleasing interim results".
Canaccord said National Express was "a quality operator", capable of delivering "best in class" margins in almost all of its business units.
The Canadian broker expects to see "modest but sustained profit growth" from National Express in the coming years, driven by a combination of growth and acquisitions, something it believes will grant it the freedom required to continue its progressive dividend policy.
While Canaccord kept its 'buy' rating and 465p target price for National Express unchanged, on the back of the positive interim results, it edged up its forecasts for the group's current year and for beyond.
The UK, Spain and North America all achieved double-digit growth in operating profit, while National Express' German rail unit increased earnings by 9.1%.
Combined with a reduction in overheads, adjusted group operating profit rose 17.4% to £139.3m, while adjusted pre-tax profits rose 13.8% and adjusted diluted earnings per share were up 12.4%.
"We have edged up our earnings estimates for the coming years to reflect the slightly better than expected performance," said Canaccord, which upped its 2019 full-year sales estimates from £2.73bn to £2.73m and pre-tax profits expectations from £237.8m to £240.8m