Broker tips: Aston Martin Lagonda, Provident Financial
Aston Martin Lagonda got a boost on Monday as HSBC upped its stance on the stock to 'buy' from 'hold' and lifted the price target to 550p from 533p, saying the launch of the DBX could be a turning point for the equity story.
"After a solid Q3 and the timely launch of the models planned for Q4, we see a lower risk of AML missing its 2019 guidance," the bank said.
It also said that after months of underperformance and the future of the company at stake, the launch of the DBX is "potentially game-changing".
"So it's 'no time to die' for AML (title of the upcoming 2020 Bond movie featuring the Aston Martin Valhalla as the new Bond car) - but, on the contrary, a time for a potential 'resurrection' supporting a path towards positive free cash flow generation in 2022," HSBC said.
It said the order book of the DBX could be "the ultimate catalyst". As part of its latest debt issuance, Aston Martin is required to communicate to the market when it reaches the first 1,400 DBX orders.
"With the global launch on 20 November we believe that this level of orders could be reached in the first few months after launch," HSBC said. "The initial customer and press reaction suggests that the DBX order book could surprise to the upside."
Commenting on the upgrade, Markets.com analyst Neil Wilson said: "On a purely valuation basis there is an argument, but debt levels are a worry."
Analysts at Berenberg lowered their price target on British sub-prime lender Provident Financial on Monday despite stating the group appeared to be "firmly on the road to recovery".
Following the group's capital markets day, Berenberg highlighted that Provident was aiming to grow its loan book by 5-10% per annum over the next five years to £3bn, while also looking to reduce its cost-to-income ratio to 38% from 45%, increase its return on equity from 16% to 20-25% and maintain dividend cover of at least 1.4x.
At the capital markets day, Provident's management detailed their strategy to achieve these targets - by improving existing products, scaling up new ones, capitalising on cross-selling opportunities, leveraging scale advantages and focusing on regulatory compliance.
However, while Berenberg said the situation was "definitely improving", trading at roughly 1.5 times book value for an average return on equity of 18% and a book value compound annual growth rate of 7% over 20Y19-21, the analysts thought Provident was already "fairly valued".
Berenberg, which dropped its price target on Provident to 470p from 540p and reiterated its 'hold' rating on the group, also updated its estimates to reflect the update and expected revenues of approximately £1.1bn, an adjusted pre-tax profit of £169m and post-tax RoE of 17% for 2019.