Broker tips: Informa, Drax
Analysts at Berenberg downgraded events and publishing company Informa to 'hold' from 'buy' on Thursday, pointing to strong movements in the group's share price, on its recent results and over the last few weeks in general.
Berenberg said the downgrade was "in no way" a closet 'sell' recommendation, stating it would "absolutely hang on to Informa shares if we already had them in a portfolio".
While the German bank considers the company to be "a relatively steady compounder", its analysts saw limited upside or catalyst in the near to medium term, which drove its decision to move to a 'hold' recommendation.
Berenberg, which upped its target price on Informa from 850p to 890p per share, said its new price target reflected small upgrades, largely FX-related, and a six-month roll-forward.
At its current share price, Berenberg said Informa trades on 17.4x earnings for 2019 and 16.3x for 2020, implying discounts of 16% and 13%, respectively.
"On an unlevered basis, Informa trades on 4.5% and 5.2% versus RELX’s 4.4% and 4.9%: not expensive, but equally suggesting limited upside after this post-results bounce," said Berenberg.
"We would hold on to existing positions, but see limited appeal for fresh money at this level: hence the downgrade to our rating."
Over at RBC Capital Markets, analysts reiterated their 'top pick' rating on British utilities firm Drax on Thursday, after the group's first-half results a day earlier reiterated 2019 underlying earnings guidance and committed to dividend growth of 12.5%.
RBC saw Drax's reiteration of £410m in EBITDA guidance as a "positive", noting that reaffirmation of financials was a major selling point in the group's first-half results, especially given market nervousness around low gas and power prices.
Another key positive RBC highlighted was the performance of recently acquired IBE assets which, despite low combined cycle gas turbine output, its analysts thought looked set to deliver "at the top end" of its £90-110m EBITDA guidance.
"All these positives give us confidence to reiterate our 'top pick' recommendation despite a long-term power price-driven cut in PT," said RBC, which did lower its price target on the group from 460p to 420p.
The Canadian broker also said it was impressed with Drax for presenting "encouraging early-stage progress" towards subsidy-free biomass generation.
As a whole, RBC made "minimal changes" to its EBITDA estimates, stating that although this masked downward pressure from power prices, this had "largely been offset" by improved biomass costs.