Broker tips: Aston Martin, Capital & Counties, Shaftesbury, IAG
Citi reiterated its 'buy' rating on shares of luxury carmaker Aston Martin on Wednesday ahead of its second-quarter results, stating the firm was on the path back towards profitability.
"In Q2 we expect to see further signs of recovery from higher DBX deliveries, increased contribution from Specials, and sustained 9% EBITDA margins ahead of a meaningful step up to an 18% EBITDA margin in 2H," it said.
Citi, which has a 2,800.0p target price on the stock, is forecasting £24.0m second-quarter underlying earnings, including a recently flagged £5.0m bad debt provision following termination of a commercial agreement with a Swiss dealer.
"Our proprietary residual value data shows an appreciation in the value of used DBX vehicles in June, demonstrating the strong pricing environment and consumer demand that should support margins," the bank said.
It added that the recent bond issuance has eased liquidity concerns and said that on its estimates, the £575.0m cash position leaves sufficient headroom for a cumulative £365.0m negative free cash flow over FY21/22 before turning positive from FY23.
Analysts at Berenberg initiated coverage on UK real estate firms Capital & Counties and Shaftesbury at 'buy' on Wednesday, stating both companies remained "well positioned to outperform" as the sector's recovery builds.
Berenberg said prime London landlords Shaftesbury and CapCo had been "hit hard by the Covid-19 pandemic", with valuations falling 8.4%, earnings turning negative and share prices still 36% below pre-pandemic peaks.
However, the analysts stated that as the UK reopens, footfall rebuilds and occupational demand returns, operations were now at an inflection point.
While the German bank initiated with a 'buy' rating on both companies, it highlighted that Shaftesbury remained its "top pick" for long-term growth - with lower financial gearing, unchallenging valuations, lower in-place rents and a better asset mix.
"At current valuations, both Shaftesbury and CapCo – with irreplaceable assets and a strong operational recovery forecast – remain attractive in our view," said Berenberg, which hit the former with a 725.0p target price and the latter with one of 200.0p.
Analysts at Credit Suisse bumped up their target price and reiterated their 'outperform' recommendation for shares of British Airways owner International Consolidated Airlines Group, arguing that the carrier's leverage was likely near its peak.
CS stated that if the company's forward bookings strengthened enough, then net debt might peak at approximately €12.0bn in the second quarter.
However, despite disappointment on the timeline for easing UK travel restrictions, the analysts saw scope for cash from forward bookings to surprise to the positive.
"With €3bn in revenues possible in 3Q21 we see scope for several hundred million Euros of cash from forward bookings to flow in through June," CS said, as it revised its target price up by 12% to 256.0p.
While IAG's 2021 operating loss was now seen coming in at €2.8bn, instead of previous estimates of €2.3bn, the Swiss broker also bumped up its estimate for the group's underlying earnings from €643.0m to €857.0m.
On the other hand, Credit Suisse also pointed out the risk that the US-UK might fail to reopen before 2022, which could see IAG's debt pile grow to €13.0bn by the end of 2021.