Broker tips: Nichols, Cairn Energy, Kingfisher
RBC Capital Markets upped its target price on shares of Cairn Energy from 185p to 195p on Friday, stating the group was "well positioned" to weather the current "macro storm".
RBC said Cairn's sale of a 10.0% stake in the Nova development offshore Norway put the group "in a better position to push on with the SNE development with its full 36.4% stake".
The Canadian broker anticipates that Cairn's first-half results, due out on 10 September, would reveal production levels of around 23,000 barrels of oil per day, revenues of $255.0m and a gross profit of $80.0m, helping its analysts to remain positive on the group despite "choppy markets".
RBC also noted that exploration and arbitration upside provided Cairn with option value from the fourth quarter onwards.
With Cairn remaining active with the drillbit in the second half, with a key well scheduled on Chimera in the UK North Sea and a maiden drilling campaign offshore Mexico, RBC said the market had high expectations for Mexico, but remained wary of the North Sea.
"There is a general unwillingness to buy in anticipation of success. With the assigned rigs yet to mobilise, we expect exploration to take a backseat until Q4/19," said RBC, which reiterated its 'sector perform' rating on the stock.
Analysts at Shore Capital reiterated their 'hold' rating on drinks maker Nichols on Friday, as investments continued to curtail some "robust" top-line momentum.
Shore Capital said it continued to view Nichols as "a high-quality business" that was "well-positioned" to take market share in the UK, with the addition of a long-term emerging market structural growth stream.
The broker praised Nichols' out of home division for the 12.0% sales growth seen in the first half of its trading year, driven by good momentum across dispense, coffee and frozen, with its Icee slush contract with Cineworld contributing from the second quarter.
"Frozen in particular is benefiting from recent investment and innovation and is an area where we would not rule out further acquisitions with assets generally on offer at more reasonable multiples and with few buyers possessing the same synergy potential," noted ShoreCap.
However, with the stock revisiting valuation multiple highs and some uncertainties surrounding its Middle Eastern operations given a possible Saudi Arabian levy on drinks with added sugar and the ongoing conflict in Yemen, Shore Capital felt it best to remain at 'hold' for now.
While ShoreCap also noted the group's balance sheet flexibility, the broker said it continued to "have a preference for Fevertree and C&C".
Over at JP Morgan, analysts retained a "cautious" view on shares of white goods retailer Kingfisher, reiterating their 'underweight' recommendation and lowering their target price from 200.0p to 190.0p.
Ahead of the company's interims on 18 September, the investment bank said that like-for-like sales had likely weakened across all three key markets during the second quarter.
Hence, they estimated that profits before tax would be down by 9.0%.
They also pointed out the hurdles that Kingfisher was facing in the form of its ongoing transformation and soft leading indicators for the UK housing market going into the Brexit deadline on 31 October, and then there were questions marks around its strategy.
"Combined with ongoing transformation disruption to performance and question marks over the group’s medium-term strategy, along with a recent softening of lead indicators in the UK housing market (unsurprising as we move closer to the October Brexit deadline)," they said.
"We still struggle to become more constructive on the shares," concluded the analysts.