Broker tips: Eckoh, IMI, Antofagasta
Analysts at Canaccord Genuity upped their rating on software outfit Eckoh to 'buy' on Tuesday after the group turned in a strong first-half performance despite Covid-19 impacts.
Canaccord firstly pointed out that in line with last month's update, Eckoh reported flat year-on-year first-half adjusted underlying earnings in a period that contained over two months of full lockdown due to the coronavirus pandemic.
Although Canaccord said the group's revenue performance was merely "creditable", down 4% on the prior year, the analysts said they were "even more encouraged" by Eckoh's order bank in its US secure payments business, standing at $26m, and the fact that UK orders were up 8% annually.
The Canadian bank also stated that Eckoh's US order bank/UK order intake figures provided "confidence for future revenue performance" in 2022-23 as it issued the stock with a 75.0p target price.
JPMorgan Cazenove upgraded engineer IMI to ‘overweight’ from ‘neutral’ on Tuesday and hiked the price target to 1,300p from 1,100p, noting the stock has underperformed over the past five years as a challenging 2014-2018 period led to a dislocation between narrative and financials and resulted in "investor fatigue".
JPM said its analysis of both the 2014 and 2018 period and the progress since, suggests that for the first time in a number of years the strategy, financials and valuation were in sync, creating a "compelling investment opportunity".
"It is impossible to ignore the disappointing share price and headline financials; however, we believe there is some mitigation and indicators of potential upside for the coming years; 1) IMI's underperformance versus our 'Synthetic IMI' is less pronounced, speaking to market-specific challenges, 2) Pressure on margins in 2014- 2016 can be partly explained by increased investment for growth, 3) Investment in SG&A, R&D and capex was above historic levels through the period.
JPM said IMI was attractively valued across all metrics, trading at a 10-year low versus the MSCI Europe Capital Goods and being one of the cheapest stocks in its sector on historic relative multiples. It is also at a "significant” discount to JPM’s sum-of-the-parts implied fair value of around 1,500.0p.
Analysts at Jefferies upped their rating Antofagasta to 'buy' on Tuesday as they took a fresh look at the broader metal and mining industry.
Jefferies, which has had a 'hold' rating on its shares due to a premium valuation based on its prior copper price deck and downside risk to its production in 2021, did warn that it expects to see an increase in operating costs after 2020 and an expected increase in capex as the company invests in its organic growth.
However, while the analysts said volumes were "still risky" in 2021 and unit costs and capex was likely to increase, they added that these factors were "more than offset" by Antofagasta's high exposure to copper, as well as the scarcity of copper miners in the FTSE.
"On our new estimates, we value Anto at 1,400.0p per share, which is 23% above Anto's current share price and compares to our prior TP of 1,100.0p per share," said Jefferies.