Broker tips: Beazley, GVC, Next, M&S
Beazley could have a once-in-a-generation opportunity to insure cyber risk as companies seek to insulate themselves from damaging attacks, Jefferies said as it upgraded the company to 'buy'.
With many people working from home, companies are at greater risk of attacks on their computer systems, Jefferies said. They are likely to offset the risk by buying cyber insurance, the broker said.
This will lead to higher claims as crime goes online and home-working creates extra risk for insurers but there will also be more demand and less competition as claims force some carriers out of the market, Jefferies said.
"Beazley may be on the cusp of generational opportunity in cyber. With much of the population now working from home, we expect a surge in risk, prices and demand," Jefferies analysts Philip Kett and Nidhi Shah said in a note to clients.
"For businesses paid to take risk, this presents a material opportunity, although one where less surplus capital is the hurdle. Thus, although Beazley may need to take steps to find capital to fund growth, this revenue opportunity is too material to miss."
Jefferies increased its rating on Beazley shares to 'buy' from 'hold' and cut its price target to 575p from 611p.
Analysts at Berenberg raised their target price on bookmaker GVC Holdings from 850p to 900p on Friday, stating the group was "well position" to emerge from the Covid-19 pandemic as "a winner".
Berenberg said it had been of the view that the gambling sector as a whole was poised for a V-shaped recovery since the beginning of the pandemic, and that relative winners would be those that can endure the current disruption without affecting their ability to bounce back.
"We believe GVC is positioned to be a relative winner," said the analysts.
"Operational performance continues to be best in class, the mitigating actions the company is taking will not be detrimental to the ongoing business or its ability to bounce back, and liquidity remains robust."
The German bank, which reiterated its 'buy' rating on the firm, also forecast that GVC's dividend would be reinstated at the release of its 2020 results in March 2021.
"We expect this dividend to be in line with the FY19 cancelled dividend, equating to 17.6p per share and £103m of cash returned to shareholders."
Credit Suisse downgraded its stance on Next to ‘underperform’ from ‘neutral’ on Friday as it upped its rating on Marks & Spencer to ‘outperform’ from ‘underperform’.
The bank said Next’s shares don’t reflect the increasing length of the likely consumer downturn, particularly given the company’s modest online volumes and downside risk for credit balances and earnings.
"Although Next is a best-in-class operator, adverse channel mix, its reliance on credit income, and the need to restructure the store estate do not guarantee a strong recovery," CS said.
Credit Suisse cut its current year earnings per share estimate by a another 21%, reflecting a longer downturn, and said that with the shares 35% above the recent lows, on 11.5x 2022 price-to-earnings ratio, they already discount much of the recovery.
The bank trimmed its price target on Next to 4,150p from 4,300p.
As far as M&S is concerned, it said the 59% year-to-date drop in the share price more than discounts its concerns over leverage and liquidity, and that its exposure to the food segment makes M&S comparatively attractive versus clothing peers, "as a longer lockdown and slower recovery implies that apparel retailers will be clearing surplus inventory through to next Spring".
CS cut its 20/21 earnings per share estimate by 53% reduced the price target to 125p from 185p.