Broker tips: Base Resources, Ferguson, Cranswick, Anglo American, BHP
Analysts at Canaccord Genuity raised their target price on mineral sands company Base Resources from 35.0p to 50.0p on Wednesday, citing its exposure to a suite of "underappreciated (but highly attractive) commodities" and a "strong" near-term dividend yield.
Canaccord, which recently initiated coverage on Base Resources, stated the "high quality" nature of its flagship development project in Madagascar, Toliara, had been highlighted earlier in the week when it released "a significant reserve and resource upgrade" to what was already a "world-class" resource.
The Canadian bank, which reiterated its 'buy' rating on the stock, said this upgrade, underpinned by the release of an updated definitive feasibility study for the project, materially expanded the expected scale of peak heavy mineral output, life and ultimate value for the project.
"Following the release of the DFS2 update, we have reviewed our assumptions and estimates for the Toliara project, and our resultant Base Resources target price," said Canaccord.
Analysts at Berenberg raised their target price on plumbing and heating products distributor Ferguson from 9,500.0p to 10,000.0p on Wednesday following its "impressive" full-year results.
Berenberg stated that Ferguson's trading profit result of $2.17bn was 4% above the top end of prior guidance, representing full-year growth of 30% and a "significant increase" in margins to 9.5% from 7.7%.
The German bank, which reiterated its 'hold' rating on the stock, also noted that the trading strength achieved in the third quarter had continued into the fourth, with trading profit growth of 37% and a margin expansion of 100 basis points.
However, while trading remained robust into the first quarter of 2022, Ferguson also indicated that it expects the rate of growth to slow as cost pressures mount and comparatives become more challenging through the year.
Barclays upgraded Cranswick to 'equalweight' from 'underweight' on Wednesday and lifted the price target to 3,500.0p from 3,200.0p as it noted that the shares have de-rated.
The bank, which initiated coverage of the stock in August 2020 with the only 'underweight' rating on the street, said: "At the time of initiation, declining pork prices, normalising exports to China and a hyper-competitive UK retail environment were the main reasons behind our UW rating.
"While the company managed these headwinds well, the recent uptick in inflation and production risks from a CO2 shortage drove a sharp derating in the shares to less than 17x on 12-month forward price-to-earnings versus a five-year average of 20x and 21x at the time of our initiation."
Barclays said it now sees the risk/reward as more evenly balanced.
RBC Capital Markets upgraded miner Anglo American on Wednesday but downgraded its stance on BHP.
The bank lifted Anglo American to 'outperform' from 'sector perform' but cut its price target on the stock to 3,450.0p from 3,600.0p
"With the shares having pulled back and platinum group metals prices stabilising, Anglo's diversified and growth-heavy portfolio of assets returns to our outperform list," RBC said.
It said the stock's valuation was attractive and higher metallurgical coal prices helped to offset some of the iron ore price weakness.
Moving on to BHP, which it downgraded to 'sector perform' from 'outperform' and slashed its price target to 1,900.0p from 2,300.0p, RBC said that with the property cycle in China turning, the firm's excess cash flows have dissipated.
"The complications and uncertain dynamics of the DLC unification could see the recently accrued premium to the London line at risk," it said. "For global investors we see better options elsewhere and downgrade to sector perform."