Broker tips: Polymetal, SIG, Domino’s, Mitchells & Butlers
Berenberg upgraded Polymetal International to ‘buy’ from ‘hold’ on Friday and lifted the price target to 1,480p from 1,140p following a rally in gold prices.
The bank noted that since initiating coverage of the stock in July, it has been hold-rated on valuation, despite being "very positive" on the medium-term outlook for the stock. Since then, it has watched as the gold price has drifted higher, taking Polymetal with it.
"In line with our gold price update, a net asset value roll forward and taking into account deleveraging over the course of 2019, and, on a blended valuation of 1.2x NAV and 9x FY 2020E EBITDA (up from 8x to reflect multiple expansion as a result of higher gold prices), we arrive at a GBp1,480 price target, which, with 20% upside in addition to a 4% dividend yield (not taking into account special dividend upside which looks increasingly likely), supports our upgrade to a buy rating."
Berenberg said one of the main reasons it likes Polymetal is the attractive production growth the company has, as well as cost downside.
"With a strong project portfolio, some of which is not included in our base case (eg Prognoz), we think there is potential to maintain a 1.8moz production run rate well into 2020," it said.
Analysts at Liberum lowered their rating and slashed their price target on British construction products supplier SIG from 150p to 100p on Friday following the group's profit warning a day earlier.
Liberum also cut its earnings per share estimates by 35%-52% across the forecast period to reflect the profit warning and the imminent disposal of the firm's Air Handling unit.
"We were surprised by the extent of the acceleration in revenue declines in the second half of 2019 and the profit impact was exacerbated by some 2019 cost reduction measures failing to deliver immediate benefits," said Liberum.
Liberum believes SIG had underperformed its markets as its businesses had been disrupted by the speed of restructuring and as sales effectiveness suffered.
"We have been buyers of the shares since the middle of 2018 as we saw the fruits of restructuring coming through. We still have confidence that new management can continue to successfully restructure the group, and we expect gross margins to be improved and overheads reduced," said the analysts.
"But the severity of the acceleration in the deterioration of sales trends makes us question how much of the benefits of restructuring will accrue to shareholders. We cut to 'hold' as we wait for an inflexion point in revenues."
The analysts did note that a potential return of £70m this year would go a way to compensate shareholders as they wait for sales to stabilise and recover.
Analysts at RBC Capital Markets raised their price targets on a number of British pub and restaurant chains on Friday despite noting that the sector now appeared to be fairly valued.
RBC raised its target price on Domino's to 350p from 330p and labelled the firm its preferred stock in the pub/restaurant space. However, RBC cut its rating on the group from 'outperform' to 'sector perform' as it said the group's relationship with franchisees still required "attention".
The Canadian broker hiked its price target on Mitchells & Butlers to 450p from 325p and raised its rating on the firm from 'underperform' to 'sector perform', stating the firm had demonstrated "very robust" trading in a tough market as the benefits of its capital-investment plans came to fruition.
RBC also highlighted that M&B was the only pub company that saw earnings upgrades in 2019.
"Valuations put it at the middle of its long-term trading range for PE and EV/EBITDA with the revaluation justified by the trading performance and sector rerating from the Greene King and EI Group takeovers," said the analysts.