Broker tips: Rentokil, StanChart
Analysts at Berenberg upgraded pest control services provider Rentokil from 'sell' to 'hold' on Tuesday and raised their target price on the stock from 440.0p to 510.0p, stating risks faced by the firm were balanced "for now".
Berenberg initiated coverage on Rentokil in February with the view that the competitive environment in US pest control would not allow for sufficient pricing increases to offset inflationary cost pressures.
However, the German bank said that this has not transpired, with pricing remaining "resilient" through the 2021 trading year.
"While we still believe that growth through M&A will become increasingly difficult in years to come, the strong performance and M&A spend guidance in FY 2021 should support sentiment for now," said the analysts.
"As the resilience of pricing removes a key catalyst for our Sell case and consensus estimates for FY 2021 appear achievable, the risk/reward is balanced in our view and we upgrade to 'hold'."
Analysts at ShoreCap reiterated their 'buy' recommendation for shares of StanChart, telling clients that it remained the most undervalued lender in its UK banking universe.
ShoreCap said while StanChart, which also "modestly" raised its guidance, conceded that the recovery from Covid-19 remained uneven and punctuated by supply-chain disruptions, the group's management also highlighted that it was encouraged by "robust levels of export growth" across many of its markets in Asia.
The bank also said that the group's guidance for 5.0% to 7.0% income growth from financial year 2022 assumed just 30 basis points of interest rate increases from 2021-25.
"Although the results themselves are unlikely to set pulses racing, at 0.5x [tangible net asset value] the shares continue to look very good value versus longer-term RoTE targets, in our view."