Broker tips: Tyman, Energean, Hargreaves Lansdown
Analysts at Liberum raised their target price on door and window components distributor Tyman from 320.0p to 400.0p on Friday and retained their 'buy' rating on the stock.
Liberum upgraded its estimates for Tyman's 2020 earnings for a third time since July 2020 following "a strong finish" to to the year and management guidance for second-half revenues broadly in line with 2019, marking a strong recovery after a Covid-19 pandemic-ravaged first half.
The analysts stated that Tyman's 12-month forward price-to-earnings ratio of around 13x looks "undemanding" given US market leadership, exposure to the strong US housing market, improving operational efficiency and falling leverage.
However, Liberum also retained "an element of caution" at this early stage of the year, with its expectation for earnings per share in 2021 being "modestly lower" than what it expects for 2020 as the tax rate was expected to rise from 21.7% to 24.5%.
RBC Capital Markets upgraded Energean on Friday to ‘outperform’ from ‘sector perform’ and hiked the price target to 1,075p from 800p.
The bank said its valuation and earnings forecasts have been updated to reflect the impact on the newly-completed Edison E&P acquisition and recently proposed acquisition of the minority (30%) stake in Energean Israel from private equity backer Kerogen Capital.
RBC said Energean remains in a transition phase as it integrates the Edison portfolio, refinances the $1.45bn project finance facility, brings the Karish gas field onstream and generates the free cash flow required to underpin a maiden dividend.
"We believe the risks are to the upside in this educational phase, and this is reflected in our recommendation upgrade," it said.
RBC noted the development of the Karish field is being undertaken on a fixed cost basis and the majority of the company’s gas sales contracts include floor prices that ensure a minimum price. As a result, Energean’s oil price linkage is minimal and its financial outlook is dominated predominantly by the pace of delivery.
Hargreaves Lansdown rallied on Friday as Shore Capital upgraded its shares to 'buy'.
Shore Capital said that given the rise in markets in the fourth quarter, and the continued elevated retail share dealing that this catalysed, it has materially upgraded forecasts for the stock and lifted its recommendation from ‘hold’.
"With most major equity indices up over 10% in the three months to 31st December (including the FTSE-AllShare up 12%), we expect a strong contribution from market movements to HL's assets under administration in the quarter," it said.
"We would also expect the buoyant markets to have re-stimulated an already elevated level of share dealing activity in the period, boosting the revenue yield in HL's shares category (circa 35% of total assets under administration).
"We think there is a more permanent aspect emerging to these favourable market conditions, enhancing HL’s ability to convert the surge in new ‘trading’ clients into ‘investing’ clients, making use of ISA and SIPP wrappers. This creates more of an annuity revenue stream once the sugar rush of dealing commission calms down."
The broker lifted its fair value to 1,850.0p from 1,625.0p and its June 2021 and 2022 EPS estimates by 12% and 10%, respectively.