Broker tips: Savannah Petroleum, Bellway, National Express
Analysts at ShoreCap reiterated their 'buy' recommendation for shares of Savannah Petroleum, telling clients that the unsecured loan faclity into which it had entered on the same day was "entirely consistent with our expectations" and that they continued to anticipate a "much higher share price" on the acquisition of assets from Seven Energy was completed.
In a research note sent to clients, analyst Craig Howie stood buy his 80.0p per share fair value estimate, reiterating his expectation that he expected "solid" earnings and cash flow to ramp-up over his forecast period.
Regarding the loan facility for up to $10.0m, Howie explained that it was meant to provide liquidity before the planned completion of the Seven deal, which he believed would occur "significantly" before its maturity date and result in a "significant" $74.0m cash inflow.
"We continue to expect final completion of the transformational Seven deal by the end of this year and, with our last note on Savannah having flagged the possibility that Savannah would arrange an interim funding solution in the meantime, the terms and quantum of the loan facility announced today are entirely consistent with our expectations."
Analysts at Berenberg reiterated their recommendation to 'buy' shares of Bellway, pointing to the company's "stellar" long-term track record and undemanding valuation to back up their case.
In a research note sent to clients, they said: "The underlying fundamentals for the UK housing market remain stable. Employment is high, wages are growing, and mortgage capacity and supply are increasing.
"However, the uncertain political environment (notwithstanding the recent developments) is weighing on sentiment," the analysts also said.
Cost pressures and "more limited" house price inflation meant that the homebuilder's numbers would come under pressure in the near-term, they added.
However, pointing to the firm's history, they believed that the downside risk to their rebased forecasts for the company' margins was "limited", due to the "structural changes to the UK land market."
"At a 14% discount to the wider sector, the valuation remains undemanding, especially in the context of c10% pa growth in TNAV per share. We believe there is potential for a further re-rating should Brexit-related uncertainty lift."
Nevertheless, Berenberg lowered its target price for the shares from 3,790.0p to 3,560.0p.
Analysts at Cannacord Genuity bumped up their target price on shares of National Express, highlighting to clients the company's "best-in-class" margins in nearly all its business units and telling them to expect sustained profit growth over the following years.
The Canadian broker was also expecting a combination of organic growth and acquisitions to allow the transport operator to sustain its progressive dividend policy.
So, on the back of the recent "sizeable" €1.0bn long-term contract win in Morocco, analyst Gert Zonneveld decided to revise his earnings estimates higher, which in turn led him to mark up his target price on the stock from 465.0p to 515.0p.
That new contract wouldn't start contributing to profits until 2021, he said, but it would then begin delivering margins in-line or in excess of the approximately 14.0% achieved by its ALSA unit in Spain, possibly offset by lower margins at ALSA following the renewal of the coach concessions - which was likely to occur in 2020.
Nevertheless, the main reason behind Zonneveld's higher sum-of-the-parts based target price, which he increased from 465.0p to 515.0p, was the higher value of the Spanish unit.
The analysts kept their recommendation for National Express shares at 'buy'.