Broker tips: Domino's Pizza, Hochschild Mining, Barclays, RBS, Lloyds
Analysts at Liberum don't see much changing in the immediate future for Domino's Pizza, expecting its weak performance of late to carry on throughout the third quarter despite easier comparatives.
The broker said inertia exists with regards to Domino's row with franchisees, which has worsened to such an extent that franchisees were now refusing to do national campaigns which may be to their own detriment - indicating the scale of the challenge ahead.
"If however, trading has not been impacted by this boycott, raises the question why the Plc should run the NAF and do group marketing," said Liberum, which reiterated its 'sell' rating on Domino's.
"Short term we are concerned about elevated debt levels. While a disposal of International would remove P&L losses, stem cash outflow and deliver +7% EPS this would not provide any impetus for us to change our investment case stance."
Liberum noted that a new chief executive and chairman would be received well, but their effect may be "limited by time", the potential scale of a reset and their ability to get the franchisees to the negotiating table.
"Time is not a friend of the shares," concluded Liberum, which also stood by its 180p target price.
Over at Berenberg, analysts upped their rating on British precious metals firm Hochschild Mining from 'sell' to 'hold' on Monday, stating the group's rare earths move was "a bit left-field", but "not a complete surprise".
Berenberg said Hochschild's $56m acquisition of the remaining 93.8% stake in BioLantánidos it didn't already own was "not a major surprise", given that the group had already flagged its investment in rare earths during its 2018 investor day and identified it as an area for "potential additional investment".
The German broker believed that the share price reaction to the news, which had seen the stock shed 13% since the announcement, was a reflection of the size of the initial transaction and lack of data available on BioLantánidos for the market to make a clear analysis of the value proposition.
"Hochschild has talked about the compelling economics of BioLantánidos and the potential upside to the existing feasibility study. However, the feasibility will take 18 months and with limited disclosure on project economics, we believe the market will assign no extra value to BioLantánidos other than the acquisition cost," said Berenberg.
"This is also not helped by the relative opacity of the rare earths market and our belief that investors view the more material entry into rare earths as a departure from its core strategy of precious metals (although management refutes this)."
However, Berenberg said its 'sell' thesis had been based on the view that grades at Hochschild's Inmaculada project would deteriorate as the Angela vein was mined out over the next three years.
"While we continue to believe this to be the case, we think it will take some time for this thesis to play out, and management is improving grades through infill drilling."
The analysts don't expect Hochschild's foray into rare earths to provide a material draw on medium-term cash flow but said it had the potential to distract from the main investment case for some time.
"We adjust our model for recent results and uplift our Pallancata valuation on lower costs; our price target drops to GBp180 per share (we lower our EV/EBITDA multiple to 5x from 5.5x); as the shares have reached our price target," concluded Berenberg.
Equity analysts at JP Morgan sounded a more positive on the prospects for domestic UK and Irish banks should the country reach an agreement with the European Union withdrawal.
Previously their economists had been "pessimistic" regarding the possibility of such an outcome but now were less so, with the house view at JP Morgan now assigning even odds of a deal.
If Westminster clinches a deal, then higher five-year interest rate swaps and lower impairments meant there was likely as much as 11% upside for lenders' earnings per share.
At the time of writing, UK bank shares were trading on an estimated 2021 price-to-earnings multiple of between 6.0-7.5.
Nonetheless, even in soft Brexit scenario, lenders' shares weren't likely to go up in a straight line, JP Morgan said.
"We caution that this is not yet a done deal with potential pull-backs ahead given the UK government does not have a majority with numerous issues still unresolved and the outlook for the domestic economy still under pressure."
Their 'top pick' in the space was Allied Irish Banks and they also preferred Barclays, both of which were trading on a price-to-tangible net asset value of 0.6, while their recommendation for RBS and Lloyds was kept at 'neutral' and that on HSBC and Metro Bank at 'underweight'.