Broker tips: Centrica, JTC

Citi reiterated its ‘buy’ rating on British Gas owner Centrica on Friday as it argued that the stock’s tepid share price performance in recent days despite the tailwind from a solid trading statement is a reflection of positioning rather than concerns on fundamentals.

"We expect Centrica to outline its sustainable level of EBIT at 1H23, which we expect to be range £1.0-1.1bn, implying an earnings per share of circa 12- 13p," the bank said.

"This compares favourably to FY26 consensus EPS currently at 10p. We expect this medium-term guidance to provide earnings and cashflow visibility and, together with clarity on capital allocation strategy (including a further £0.75bn cash return) and investment return hurdle rates, we expect both to underpin current valuation and drive a continued re-rating of the shares."

Citi also said it sees FY23 EPS guidance as very conservative, with little sign of price competition despite marginal uptick in churn and market stabilisation mechanism/ban on acquisition tariffs still in play.

Jefferies upped its price target on JTC to 875p from 860p as it said the proposed acquisition of South Dakota Trust Company and associated placing have prompted it to revise its forecasts upwards.

"The deal is in line with JTC's strategy of organic and acquisitive growth and addresses its largest growth market: the USA," it said.

"Integration of SDTC should be relatively smooth given the long relationship between the companies and JTC's highly experienced integration team. We expect more acquisitions in due course, possibly even this year."

Jefferies noted that on a proforma basis, the deal adds around £30m of revenue and £12m of FY24 adjusted EBITDA, but said it expects there will also be revenue synergies.

Jefferies has a ‘buy’ rating on JTC. "We are buyers of sticky revenues, stable margins and a big growth opportunity," it said.