Broker tips: NCC Group, Spirax-Sarco, Marks & Spencer
Analysts at Canaccord Genuity upgraded software and services firm NCC Group from 'hold' to 'buy' and raised their target price on the stock from 265.0p to 318.0p on Friday, citing its "strategic acquisition" of IPM.
Canaccord Genuity stated the addition of IPM, which works in escrow services and holds source code for safekeeping for its clients should something happen to the originator of the code, had set NCC up to be the number one in escrow services in the US and UK.
"We view the Dec 20 acquisition exit multiples of 6.7x EV/sales and 10x EV/EBITDA as good value for a highly profitable, cash-generative and extremely complementary business," said the analysts.
Canaccord stated that given the accretive nature of the purchase, it had upgraded its adjusted earnings per share estimates for both 2022 and 2023 by around 13-15% and noted that importantly, NCC also expects full-year 2021 adjusted earnings per share to exceed market consensus of £33.0m.
Goldman Sachs upgraded its stance on shares of Spirax-Sarco Engineering to 'neutral' from 'sell' following the company's first-quarter trading update on Thursday.
The bank noted that since adding the stock to its sell list on 3 July 2019, the share price is up 25% versus the European Capital Goods average up 40% and the FTSE World Europe up 5%. It said Spirax's outperformance versus the FTSE World Europe is due to many factors including the outperformance of capital goods companies, ESG exposure and a resilient performance during the coronavirus pandemic.
Although it continues to believe that Steam Specialities' ability to outgrow local IP is diminishing and expects it to only marginally outperform over its forecast period, Goldman said it has materially increased its estimates for Watson Marlow, which has outperformed its expectations over the last few years.
Goldman, which hiked its price target for Spirax to 11,400.0p from 10,500.0p, said it expects the Watson Marlow business to grow organically in 2022 and 2023 due to the pace of vaccine roll-outs across most of the world - in particular emerging markets - potential need for booster shots, possible duplication of vaccine supply chains and an accelerated adoption of biotechnology following the success of mRNA vaccines.
Analysts at Berenberg hiked their target price on retailer Marks & Spencer from 160.0p to 180.0p on Friday, citing reopening recovery.
Berenberg stated that Marks & Spencer, which reports its full-year results on 26 May, will likely reveal in its earnings the progress it has made to address weaknesses – and that it should emerge from the Covid-19 pandemic "a stronger business".
While the analysts acknowledged that Covid-19 restrictions will have "dragged on performance," in M&S's clothing and home division, e-commerce efforts accelerated, while in its food wing, they stated Ocado tie-up benefits remained "underappreciated". It also noted M&S Food should benefit from re-openings due to its "food-to-go" exposure.
"With peers experiencing positive trends since reopening, this provides confidence in M&S' performance as Covid-19 restrictions ease," said Berenberg, which also reiterated its 'buy' rating on the stock.
The German bank also pointed out that M&S shares still trade roughly 15% below their pre-pandemic levels, despite operational improvements to the business in the last 12 months.